Tech-heavy Nasdaq 100 futures slide as Alphabet and Microsoft disappoint in earnings

New York City, US – Nasdaq 100 futures dropped Wednesday morning as two tech giants released their quarterly results, leading to a decline in stock market futures. Investors are also eagerly awaiting the Federal Reserve’s decision on rate policy.

After the closing bell, shares of Alphabet, the parent company of Google, plunged more than 5%, while Microsoft slipped nearly 1% as the companies reported their quarterly earnings. Although both companies surpassed expectations in terms of revenue and profit, Alphabet fell short in ad revenue, disappointing analysts.

Sam Stovall, the chief investment strategist at CFRA Research, suggested that the sell-off in Alphabet and Microsoft shares despite their positive results could be attributed to the trend of “buy on rumors, sell on news.” Investors may be cashing in on their gains, Stovall noted.

The technology sector, which has been a driving force behind the recent market rally, is currently trading at a high valuation of almost 29 times its projected 2024 earnings. Stovall emphasized the need for continued earnings growth to sustain these elevated price-to-book levels.

Tuesday’s trading session saw mixed results, with the S&P 500 edging down by 0.06% and the Nasdaq Composite losing 0.76%. On the other hand, the Dow outperformed, registering a gain of 0.35%.

Looking ahead, the market’s attention is focused on the Federal Reserve’s rate decision. The CME FedWatch tool indicates an almost 98% probability that rates will remain unchanged. Investors will closely analyze the central bank’s post-meeting statement and Fed Chair Jerome Powell’s comments for any indications of potential shifts in policy stance.

Stovall predicted that policymakers would likely adopt a “later and fewer approach” to rate cuts, taking a more cautious stance to avoid the mistakes of the past.

In terms of earnings announcements, Boeing, a component of the Dow, is scheduled to release its results before the opening bell, while chipmaker Qualcomm will report its quarterly earnings after the market closes.

Investors remain wary of the tech sector’s high valuations, and the outcome of the Federal Reserve’s rate decision could significantly impact market sentiment moving forward.