Key facts
- US stock index futures steadied after a sharp selloff.
- Microsoft shares rose premarket on strong earnings and capital expenditure outlook.
- The Federal Reserve held interest rates steady.
- Oil prices jumped amid renewed Middle East violence.
- Meta Platforms shares dropped significantly due to AI spending costs.
- Apple and Amazon are set to report earnings later today.
U.S. stock index futures steadied on Thursday, recovering from a sharp selloff driven by uncertainty surrounding the Federal Reserve's policy outlook. Microsoft's forecast-beating results and a capital expenditure outlook below Wall Street estimates provided some relief to investors concerned about the high costs of artificial intelligence.
Investors have been spooked by rising AI costs at major technology firms, even as they report strong earnings. Negative cash-flow reports from Alphabet and Tesla last week had previously sparked a bout of selling in AI-linked stocks, with chip stocks also coming under pressure due to high valuations. The tech-heavy Nasdaq had dropped 10% from its early June peak by Wednesday.
Adding to AI concerns, Meta Platforms dropped 9.2% after reporting a 91% drop in second-quarter free cash flow, highlighting the financial strain of its AI buildout. Apple and Amazon are scheduled to report earnings after the market close on Thursday.
U.S. stocks had fallen sharply on Wednesday, with the S&P 500 posting its biggest percentage drop since June 10. The Federal Reserve left interest rates unchanged in the 3.50%-3.75% range, but mixed messages from Fed Chair Kevin Warsh left traders confused about the future path of borrowing costs.
U.S. 30-year Treasury yields jumped to 19-year highs on Thursday, while the 2-year note yield, reflecting near-term rate expectations, was largely unchanged at 4.26%. Traders currently see a 65% chance that the U.S. central bank will raise interest rates by 25 basis points at its September meeting, according to CME Group's FedWatch tool.
Key economic data, including the preliminary reading of second-quarter GDP, personal consumption expenditures for June, and weekly initial jobless claims, are due at 8:30 a.m. ET. The GDP report is expected to show the U.S. economy grew at a 2.1% annualized rate last quarter, matching the pace of the January-March quarter.
In premarket trading, S&P 500 E-minis were up 0.41%, Nasdaq 100 E-minis were up 0.86%, and Dow E-minis were up 0.23%. Among other stocks, Qualcomm fell 5.3% after forecasting fourth-quarter profit below estimates and a faster-than-expected decline in revenue from Apple products. U.S.-listed shares of Arm dropped 5% after the British chip designer said it expects smartphone royalties to fall in the upcoming quarter. Starbucks climbed 7.3% after raising its annual sales and profit forecasts, while Chipotle Mexican Grill added 5% after raising its annual sales forecast.