Nasdaq Futures on Shaky Ground as Earnings Prevail

On Thursday, Nasdaq futures took a downward turn, indicating the possibility of entering a correction phase. This decline was fueled by disappointing earnings reports from major Big Tech companies and the simultaneous rise in bond yields, which continued to exert pressure on the stock market.

Contracts linked to the Nasdaq 100 (^NDX) experienced a drop of nearly 0.9%, underscoring the ongoing challenges faced by tech stocks. This decline came after these stocks recorded their weakest single-day performance in eight months just the previous day.

Similarly, S&P 500 (^GSPC) futures saw a 0.5% decrease, reflecting the benchmark’s lowest closing point since May. Dow Jones Industrial Average (^DJI) futures slipped by 0.2%, mirroring the minor losses observed in the previous trading session.

The primary driver behind these market movements remains corporate earnings. Investors reacted negatively to third-quarter reports from large-cap companies that failed to meet expectations. There is also growing apprehension about elevated valuations in the context of rising Treasury yields, as the 10-year yield benchmark (^TNX) approached 5% on Thursday.

One notable example was Meta (META), which initially reported earnings that exceeded revenue and profit projections. However, the company’s shares reversed course after its parent company, Facebook, cautioned that geopolitical instability could impact its advertising business. On Thursday, the flow of earnings reports continued, with Amazon (AMZN), Intel (INTC), Ford (F), and Chipotle (CMG) taking the spotlight.

Overall, the results from Big Tech firms have contributed to the prevailing uncertainty in the stock market. They have failed to provide a clear narrative for investors, unlike past earnings seasons where they often played a prominent role in driving market rallies.

BlackRock’s Global CIO, Rick Rieder, emphasized the dispersion in earnings outcomes, particularly highlighting the performance of Microsoft and Alphabet. Rieder commented, “We are seeing conflicting signals in the market. This is why the markets are so volatile and unpredictable.”

The release of the third-quarter GDP reading on Thursday may offer some guidance, as it is expected to represent the peak of economic growth in 2023, based on a series of data points indicating economic resilience.