Stock futures moved lower on Wednesday night as investors digested a batch of Big Tech earnings and the Federal Reserve’s interest rate decision.
Futures tied to the Dow Jones Industrial Average slipped 95 points, or 0.2%. S&P futures fell 0.2%, while Nasdaq 100 futures was down 0.3%.
Megacap tech giants Alphabet, Meta and Microsoft each reported quarterly results after market close Wednesday, which market participants have been keenly awaiting for further clues on the health of artificial intelligence trade. Investors are trying to gauge the pace of spending on AI and the returns companies are getting for this investment. While Google parent Alphabet shares popped about 6% on the back of strong results, shares of Meta and Microsoft tumbled about 8% and 4%, respectively. Reactions to the results weighed on the broader market in after-hours trading.
Meta recorded its highest revenue growth since the first quarter of 2024, but the social media company said that President Donald Trump’s One Big Beautiful Bill Act led it to incur a one-time charge of $15.93 billion. Meta expects the law will weigh on U.S. federal cash tax payments for the rest of this year and future years. Microsoft shares moved lower after the company said its investment in OpenAI reduced its earnings by $3.1 billion in the quarter. That revelation sparked worries about ongoing AI spending.
In the previous session, the Dow Jones Industrial Average rolled over — ending the day down about 0.2%, or about 74 points — after it briefly touched a record high earlier. The S&P 500 ended the day flat, while the Nasdaq closed up nearly 0.6%.
The 30-stock Dow had notably declined after Federal Reserve Chair Jerome Powell suggested the central bank may not cut interest rates again at its December meeting, which investors had been betting on. “A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it,” he said. The Fed on Wednesday lowered its benchmark overnight borrowing rate by a quarter percentage point to end its two-day policy meeting, putting it in a range of between 3.75% to 4%.
“The interest rate cut was the easy part as markets were giving the Fed breathing room,” said Chris Maxey, chief market strategist at Wealthspire Advisors. “For now, there is appropriate balance between monetary policy and the labor/inflation picture. Powell spooked markets with comments on the lack of conviction on a December rate cut and that’s where we may start to see the slow to respond narrative begin.”
CFRA chief investment strategist Sam Stovall said that the Fed “might be forced to cut more than they indicated wanting to” if tech earnings prove that AI-related productivity is ramping up at a faster pace than anticipated. October has historically been the most volatile month of the year, he noted, adding that any upcoming price uncertainty could ultimately provide traders with an attractive buying opportunity.
Investors are awaiting a high-stakes meeting between Trump and Chinese President Xi Jinping set to begin late Wednesday, as discussions could provide more clarity on the state U.S.-China relations amid ongoing trade disputes.
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