Stock futures edge down, tech slumps amid earnings

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Stock futures edged down on Tuesday, as tech stocks slid following a string of disappointing earnings reports.

The Nasdaq and S&P 500 futures both opened slightly lower, while the Dow Jones Industrial Average opened with slight gains.

The market’s reaction to the latest string of tech earnings reports has been mixed, with some companies reporting strong numbers and others falling short of expectations.

Tesla Inc. and Apple Inc. are among the tech stocks that have taken a hit following the earnings reports. Shares in both companies dropped after their quarterly results disappointed investors.

Meanwhile, Microsoft Corp., Inc. and Netflix Inc. have seen their stock prices jump following their own better-than-expected earnings reports.

The technology sector, which accounts for about 20% of the S&P 500, has been a key driver of the broad market’s rally over the past year. Investors will be closely watching to see if the sector can continue its strong performance, or if the recent slump is a sign of a broader pullback.

Looking further ahead, investors will also be keeping an eye on the Federal Reserve’s latest policy decision. The central bank is expected to maintain its current dovish stance and may indicate plans for further stimulus measures.

Overall, Tuesday’s mixed marketplace reflects investor caution in the face of an uncertain earnings season and mounting economic concerns. Investors will need to take a wait-and-see approach as more companies reveal their quarterly results while also monitoring policy decisions from the Federal Reserve.

U.S. stock futures slumped ahead of the open Tuesday, with tech mostly underperforming as a flurry of corporate earnings rolled in.

Futures tied to the S&P 500 (^GSPC) dipped 0.2%, while futures on the Dow Jones Industrial Average (^DJI) ticked down 0.3%. Contracts on the technology-heavy Nasdaq Composite (^IXIC) declined roughly 0.4%.

The yield on the benchmark 10-year U.S. Treasury note ticked down to 3.54% from 3.546% on Monday. The dollar index ticked up 0.16% to $102.44.

The major U.S. stock averages tumbled on Monday, kicking off a week packed with macro events and major tech earnings. For the session, tech underperformed, as the Nasdaq lost 2% in the index’s worst day since December 2022.

Oil traded sharply lower with WTI down more than 1% ahead of the OPEC+ meeting on Wednesday as oil ministers will review levels of output. The Joint Ministerial Monitoring Committee of OPEC+ is expected to endorse the group’s current oil output policy.

The biggest item on the calendar is the FOMC’s policy meeting, which commences on Tuesday ahead of an anticipated Wednesday decision to hike rates by quarter percentage point, bringing the federal funds to a target range of 4.5 to 4.75%. Yet, It’s unclear what could come next.

“[We] expect Powell to be quite hawkish in the press conference,” Michael Feroli, chief U.S. economist at JP Morgan, wrote in a note. “We look for him to stress two themes: (i) slowing is not stopping, and (ii) don’t expect rate cuts in ’23.”

Jerome Powell, Chair of the Board of Governors of the Federal Reserve, attends a Central Bank Symposium at the Grand Hotel in Stockholm, Sweden on January 10, 2023. - Senior central bank officials and prominent academics participated in four panels that address central bank independence from various angles  climate, payments, mandates and global policy coordination. - Sweden OUT (Photo by Claudio BRESCIANI / TT News Agency / AFP) / Sweden OUT (Photo by CLAUDIO BRESCIANI/TT News Agency/AFP via Getty Images)

Jerome Powell, Chair of the Board of Governors of the Federal Reserve, attends a Central Bank Symposium at the Grand Hotel in Stockholm, Sweden on January 10, 2023. (Photo by CLAUDIO BRESCIANI/TT News Agency/AFP via Getty Images)

It’s also a significant week for the European Central Bank and the Bank of England, as it’s widely expected for officials to raise benchmark interest rates by 50 basis points on Thursday. Such a move would mark a slowdown from last year’s aggressive hikes, as inflation cools and unemployment levels remain low.

Earnings season in full force

Wall Street continues to digest earnings season as a flurry of corporate numbers rolled in before the opening bell Tuesday.

Exxon Mobil (XOM) shares fell nearly 3% in premarket trading after the company reported earnings that beat expectations in the fourth quarter, while revenue came in short. The oil giant posted adjusted quarterly earnings per share of $3.40 compared to analyst forecasts of $3.29. Revenue in the quarter was $95.43 billion, lower than expectations of $97.3 billion.

McDonald’s (MCD) shares rose after the company reported fourth-quarter earnings Tuesday morning that beat expectations as more customers visited the fast-food chain amid higher menu prices. Revenue for the quarter came in at $5.93 billion compared to $5.75 billion expected, while the company posted adjusted earnings per share of $2.59 compared to analysts forecasts of $2.44.

General Motors (GM) shares increased 5% before the bell after the car maker reported a 15% rise in net income in the fourth quarter amid weak consumer spending.

United Parcel Service (UPS) posted a decline in revenue for the fourth quarter as the company delivered fewer items during the holiday season. Revenue for the quarter fell 2.7% to $27.0 billion, missing analyst expectations of $28.09 billion. UPS reported an adjusted profit of $3.62 per share for the quarter ended Dec. 31, higher than expectations of $3.59 per share.

Caterpillar Inc. (CAT) posted lower-than-expected quarterly profit, the first time since the start of the pandemic. Caterpillar reported Tuesday an adjusted fourth-quarter earnings of $3.86 a share, while analysts expected a $3.97.

Spotify (SPOT) reported fourth-quarter results that gave investors a mixed outlook ahead, as the company delivered a wider-than-expected loss and a beat on gross margins. Revenue for the fourth quarter missed. Meanwhile, total monthly active users surpassed expectations, coming in at 489 million compared to 478 million expected.

Elsewhere in markets, shares of Carvana (CVNA) surged on Monday by as much as 33%. According to Bespoke Investments data, Carvana is part of the list of the 35 most heavily shorted stocks in the Russell 1,000 at the moment. Some of these stocks on average are up 18.8% this year.

Johnson & Johnson (JNJ) shares fell 0.2% Tuesday morning after a panel of federal appeals judges rejected its effort to push lawsuits over its talc products into bankruptcy court.

Meanwhile, also on deck for this week earnings are tech heavyweights Amazon (AMZN), Apple (AAPL), Alphabet (GOOG) and Meta Platforms (META).

Overseas, the International Monetary Fund said on Monday that it expects the global economy to slow. In the U.S., economic growth will slow to 1.4% this year as central banks continue to work to tame inflation, the IMF said.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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