(Reuters) – U.S. stock index futures fell on Wednesday as downbeat results dragged chip stocks and markets turned cautious ahead of more economic data and the Federal Reserve's interest rate decision later in the day.
Advanced Micro Devices lost 6.3% in premarket trading after its forecast for AI chip sales failed to impress investors, while Super Micro Computer lost 9.1% as the artificial intelligence server maker reported a turnover in the third quarter reported below expectations.
Other chipmakers also traded in the red, with Nvidia and Micron Technology each down more than 2%.
U.S. stocks closed lower on Tuesday as data on a rise in labor costs and deteriorating consumer confidence dampened interest rate cut expectations.
Investors will now wait for a slew of economic data throughout the day to further gauge the state of inflation in the US economy before turning their attention to the Fed's interest rate decision at the end of the two-day meeting.
The day's docket includes ADP's April national employment figures at 8:15 a.m. ET, S&P Global's final April PMI data shortly after the opening bell, ISM manufacturing PMI data, and JOLTS figures for vacancies, both at 10 am ET.
“The FOMC meeting will likely confirm that, from a global perspective, the script has been flipped. “Everyone thought the Fed would be the first or one of the first central banks to cut rates this cycle, now it looks like it will be one of the last,” said Brendan Murphy, head of Global Fixed Income, North America , at Insight Investment.
“While we still expect rate cuts to remain on the agenda later this year, disinflation has stalled in the US, while in many places abroad this has not.”
Money markets expect the U.S. central bank to hold rates steady later in the day and price in about 28 basis points (bps) of rate cuts this year, down from about 150 basis points at the start of 2024, according to LSEG data.
A sharp decline in interest rate cuts and tensions in the Middle East made April a tough month for US stocks, with all three stock indexes posting their first monthly losses in six months.
Their performance in May will be tested as the rest of the first quarter earnings season continues and the interest rate outlook becomes clearer.
According to Reuters calculations, over the past 50 years the S&P 500 has risen an average of 4.8% between November and April, and only 1.2% between May and October, giving rise to the popular market adage “Sell in May and walk away.” .
At 5:31 a.m. ET, the Dow E-minis were down 108 points, or 0.28%, the S&P 500 E-minis were down 25.5 points, or 0.5%, and the Nasdaq 100 E-minis fell by 145.25 points, or 0.83%.
In other developments, Starbucks fell 12% premarket, as the coffee giant lowered its annual sales forecast after reporting a decline in same-store sales for the first time in nearly three years.
On the plus side, Pinterest rose 18% after the social media company forecast second-quarter revenue above Wall Street estimates.
(Reporting by Shristi Achar A in Bengaluru; Editing by Devika Syamnath)
