(Reuters) – U.S. stock index futures fell on Wednesday as poor results dragged chip stocks and markets turned cautious ahead of further economic data and the Federal Reserve’s interest rate decision later in the day.
Advanced Micro Devices fell 6.3% in premarket trading after its forecast for AI chip sales failed to impress investors, while Super Micro Computer fell 9.1% as the maker of artificial intelligence servers posted a third-quarter loss reported sales that were below estimates.
Other chipmakers were also in the red, with Nvidia and Micron Technology each down more than 2%.
U.S. stocks ended Tuesday in the red as data showing a rise in labor costs and deteriorating consumer confidence dampened expectations of a rate cut.
Investors will now wait for a series of economic data later in 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 its two-day meeting.
The day’s slate includes April’s ADP National employment numbers at 8:15 a.m. ET, S&P Global’s final April manufacturing PMI data shortly after the opening bell, ISM manufacturing PMI data and the numbers JOLTS open positions at 10 a.m. ET.
“The FOMC meeting will likely confirm that the script has turned from a global perspective. “Everyone thought the Fed would be the first or one of the first central banks to cut rates this cycle, but 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 be on the agenda later this year, disinflation has stalled in the U.S. where it has not in many places abroad.”
Money markets expect the Federal Reserve to hold interest rates on hold later today, pricing in only about 28 basis points (bps) of rate cuts this year, compared with about 150 bps at the start of 2024, LSEG said -Data.
A sharp drop in interest rate cut bets and tensions in the Middle East made April a difficult month for U.S. stocks, as all three stock indexes posted their first monthly loss 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.
Over the past 50 years, the S&P 500 has gained an average of 4.8% between November and April and just 1.2% between May and October, according to Reuters calculations, giving rise to the popular market saying “Sell in May and Go Away.” .
As of 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 were down 145.25 points or 0.83%.
Among other things, Starbucks fell 12% premarket as the coffee giant cut its full-year sales forecast after reporting a decline in same-store sales for the first time in nearly three years.
On the bright 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)