Nasdaq futures decline as AI results fail to live up to hype: Markets Wrap

(Bloomberg) — U.S. stock futures fell after tech giants' earnings fell short of Wall Street's lofty expectations and investors braced for the Federal Reserve's first interest rate decision of the year.

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Nasdaq 100 contracts fell 1.2%, while S&P 500 contracts fell 0.5%. Microsoft Corp., Alphabet Inc. and Advanced Micro Devices Inc. slumped in premarket trading after their updates failed to keep up with recent hype surrounding tech megacorporations and artificial intelligence. Paramount Global rose 21% after Bloomberg reported that media mogul Byron Allen made a $14.3 billion offer for the media and entertainment company.

It's a busy day for earnings in Europe, too: Novo Nordisk A/S became the second European company to reach a market value of $500 billion after it said sales and profits rose again this year thanks to its blockbuster obesity vaccine Wegovy will rise. Hennes & Mauritz AB shares fell 10% after the retailer missed profit estimates and its chief executive resigned. The European Stoxx 600 index gained 0.3%.

Later, attention turns to the Fed, whose Federal Open Market Committee is poised to keep interest rates in a range of 5.25% to 5.5%, a 22-year high first hit in July. The interest rate decision and accompanying statement will be released in Washington at 2 p.m. Chairman Jerome Powell holds a press conference 30 minutes later.

Traders see about a 40% chance that the central bank will cut interest rates for the first time in March, but most Fed officials say it is too early to speculate on such a reversal. While Powell may say recent declines in inflation are encouraging, he may still show little urgency for easing given the resilience of the labor market and economic growth.

The story goes on

“Even if this is not our scenario, we expect the Fed to keep the door open for a possible rate cut in March without sending a clear and definitive signal,” said Alexandre Hezez, chief investment officer at Group Richelieu in Paris .

Turning to monetary policy in Europe, data released on Wednesday showed easing price pressures in France, adding to optimism that the European Central Bank could start cutting interest rates as early as April. The 10-year German government bond yield fell as much as eight basis points as the euro weakened.

Meanwhile, the dollar strengthened against most of its Group of 10 peers, while Treasury and 10-year Treasury yields fell.

In Asia, Japanese bond yields rose and the yen rose as a summary of the Bank of Japan meeting suggested it was moving closer to raising interest rates for the first time since 2007. Japanese stocks also rose on signs the Bank of Japan could move to raise interest rates. The end of negative interest rates boosted optimism about lenders' profitability.

Australian shares closed at a record high after weak inflation data bolstered bets on monetary easing. Local dollar and Treasury yields fell.

Stocks in China and Hong Kong extended losses after data showed factory activity in China fell for another month. Mainland stocks were on the verge of erasing any gains made on hopes of stronger support measures from authorities. A broader range of Asian stocks rose slightly.

Elsewhere, oil prices headed for their first monthly rise since September, as an escalation in attacks on ships in the Red Sea led to a diversion of tanker traffic and raised fears of a wider conflict in the Middle East.

Company highlights

• Media mogul Byron Allen has made a $14.3 billion offer to buy all of Paramount Global's outstanding shares, according to people familiar with its terms.

• Novo Nordisk said sales and profits will rise again this year as the company continues to roll out its blockbuster obesity drug Wegovy around the world.

• Hennes & Mauritz, Europe's second-largest listed fashion retailer, appointed Daniel Erver as CEO, succeeding Helena Helmersson. The announcement comes as the company reported fourth-quarter profit that fell short of estimates.

• Novartis AG forecasts high-single-digit profit growth this year as the Swiss drugmaker focuses on drugs with greater growth potential.

• GSK Plc upgraded its long-term outlook, boosted by sales of the pharmaceutical company's new RSV vaccine and other drug launches.

• Iliad SA said Vodafone Group Plc rejected a revised offer to combine the two companies' Italian operations, ending its consolidation drive in one of Europe's most competitive telecoms markets.

• Samsung Electronics Co. posted a fourth straight quarter of profit decline in the holiday quarter after a long-awaited rebound in chip and electronics demand left the world's largest memory maker with few returns.

Important events this week:

• Boeing reports earnings Wednesday amid the U.S. government's safety investigation

• Federal Reserve interest rate decision and Fed Chairman Jerome Powell's press conference on Wednesday

• U.S. Treasury Department Quarterly Refund, Wednesday

• China Caixin Manufacturing PMI, Thursday

• Eurozone S&P Global Manufacturing PMI, CPI, Unemployment, Thursday

• US productivity, construction spending, ISM production, initial jobless claims, Thursday

• Apple, Amazon, Meta, Deutsche Bank, BNP Paribas results, Thursday

• Bank of England interest rate decision, Thursday

• US employment report, University of Michigan consumer sentiment, factory orders, Friday

Some of the key moves in the markets:

Shares

• The Stoxx Europe 600 was little changed at 9:57 a.m. London time

• S&P 500 futures fell 0.5%

• Nasdaq 100 futures fell 1.2%

• The futures on the Dow Jones Industrial Average hardly changed

• The MSCI Asia Pacific index rose 0.1%

• The MSCI Emerging Markets Index fell 0.5%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro fell 0.2% to $1.0823

• The Japanese yen fell 0.1% to 147.80 per dollar

• The offshore yuan was unchanged at 7.1869 per dollar

• The British pound fell 0.2% to $1.2670

Cryptocurrencies

• Bitcoin fell 2% to $42,698.11

• Ether fell 2.7% to $2,315.7

Tie up

• The 10-year Treasury yield fell one basis point to 4.02%

• The yield on 10-year German government bonds fell five basis points to 2.22%

• The 10-year UK government bond yield fell three basis points to 3.87%

raw materials

This story was produced with support from Bloomberg Automation.

– With support from Tassia Sipahutar, Winnie Hsu and Julien Ponthus.

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