Futures tied to the tech-heavy Nasdaq index fell more than 1% on Wednesday as disappointing results and warnings from Microsoft and Alphabet sparked losses among megacap companies and raised fears of slowing economic growth.
Microsoft Corp (MSFT.O) posted its lowest sales growth in five years and forecast second-quarter revenue below Wall Street estimates, while Alphabet (GOOGL.O) reported downbeat ad sales and warned of a slowdown in advertising spending. Shares of both companies fell around 6% each in premarket trading and weighed on Amazon.com (AMZN.O) and Apple (AAPL.O), which are scheduled to report results later this week. They were down 3.7% and 0.9%, respectively.
"The results of the big technology firms were seen as a key determining factor in market sentiment going into the U.S. third quarter reporting season and both Microsoft and Alphabet have given investors reason to worry," said Laith Khalaf, head of investment analysis at AJ Bell. Shares of Meta Platforms (META.O) fell 3.9% and Pinterest (PINS.N) 4.1% as they rely on ad revenue. U.S.-listed shares of Spotify Technology dropped 5.7%, as margins came under pressure from a slowdown in ad growth.
The extensive weakness in the tech sector comes despite a drop in the benchmark 10-year Treasury yield , which fell for the second straight day on rising bets over a slowdown in the pace of interest-rate hikes. Expectations of a less-hawkish Federal Reserve have helped Wall Street's main indexes notch three straight sessions of gains, but downbeat earnings and forecasts suggested that the Fed's rapid interest rate hikes are slowing the economy.
The U.S. central bank is expected to deliver its fourth 75 basis-point hike in its Nov. 1-2 policy meeting against the backdrop of recent data pointing to economic softness.
Analysts have set the bar low for third-quarter reporting season, with aggregate S&P 500 earnings growth seen at 3.3% year-on-year, down from 4.5% at the start of the month, according to Refinitiv data.
