Stock futures pointed to a lower open on Thursday, threatening to snap the market’s three-day winning streak, as a bruising post-earnings plunge in Alphabet collided with a pair of red-hot economic reports that strengthened the case for more Federal Reserve rate hikes.
Nasdaq 100 futures led the premarket decline, while S&P 500 and Dow futures also eased. On Wednesday, the Dow closed at 52,475, the S&P 500 at 7,744 and the Nasdaq at 26,550, all higher for a third straight session.
The AI free pass is over
Alphabet fell sharply in premarket trading, after reporting disappointing search advertising results alongside a surge in cash burn as its artificial intelligence spending accelerated. Microsoft went the other way, rising after delivering a big cash-flow beat and forecasting strong cloud growth.
The split verdict marks a turn for the AI trade: investors are no longer giving every hyperscaler a free pass to spend without limit, and are now separating the companies showing returns from those showing only bills. The damage spread across software – Fortinet tumbled after its quarterly report and ServiceNow dropped sharply after missing profit estimates – while Marvell Technology slid on reports it is in advanced talks to buy data-center optics maker Lumentum, which rose.
Elsewhere on the earnings board, Caterpillar fell after its quarterly results, Eli Lilly climbed after forecasting annual revenue above expectations, Carvana jumped on a revenue beat and Chipotle gained on stronger-than-expected comparable sales.
A hot economy gets hotter
The Commerce Department opened the day with two reports that keep the pressure on the Fed. The economy grew at a 3.4% annualized rate in the third quarter, accelerating sharply from 2.2% in the second. At the same time, the Fed’s preferred inflation gauge, the personal consumption expenditures price index, rose 0.5% in September for a 3.6% annual rate, with the core reading at 3.1% – both far above the central bank’s 2% target. Consumer spending rose 0.5% and personal income just 0.2%, meaning prices are rising faster than paychecks.
That combination, a strong economy with persistent inflation, is exactly what the Fed’s hawks pointed to on Wednesday. Traders now see a better than 80% chance of a rate hike in December, according to CME FedWatch, with another increase priced in by mid-2027.
Two officials wanted a hike now
Wednesday’s Fed statement revealed a 10-2 vote to hold the benchmark rate at 3.75% to 4%, with Lisa Cook and Beth Hammack dissenting in favor of an immediate quarter-point increase, a rare public split on the hawkish side. The statement said the economy is expanding at a strong pace, inflation remains elevated, and promised: “The Committee will deliver price stability.” In his press conference, Chairman Kevin Warsh said inflation is “too high” and warned that energy prices have moved higher again in recent weeks.
Around the markets
Japan’s Nikkei rose 1.6% overnight, and European stocks rallied ahead of the European Central Bank’s own rate decision later in the day. The 10-year Treasury yield hovered above 5% after the morning’s data. Oil pulled back, while gold also eased.
What to watch
Intel and Amazon headline another heavy earnings slate after Thursday’s closing bell, the ECB decision lands later in the day, and Americans vote in Tuesday’s midterm elections, with the cost of living at the center of the campaign and now, demonstrably, at the center of the Fed’s next move too.
JBizNews Desk | Wall Street
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