S&P 500, Nasdaq futures rise as rate-cut hopes prevail; Meta jumps

[August 01, 2024]  (Reuters) - Futures for the S&P 500 and the Nasdaq rose modestly on Thursday, boosted by the U.S. Federal Reserve's signals of a September interest-rate cut and a rosy sales forecast from Meta, but a pullback in some megacap and chip stocks capped gains.

Meta Platforms soared 7% in premarket trading after a second-quarter revenue beat and an upbeat third-quarter sales forecast pointed to the possibility that its artificial intelligence costs would be covered.

"Meta has bought the AI theme some time... investors are willing to overlook increased capital expenditure, as long as revenue growth remains strong," said Kathleen Brooks, research director for XTB.

The Facebook-owner's quarterly results were the first among the "Magnificent Seven" group of companies to enthuse investors, allaying some concerns around AI spending following dismal earnings from Alphabet and Microsoft last month.

Wall Street has been on tenterhooks, looking for signs that the tech behemoths can hold on to their bumper gains after steering the U.S. equity market to record highs this year on AI euphoria and hopes of early rate cuts.

Premarket trends in megacaps were largely mixed after Wednesday's rally, with Apple and Amazon.com gaining 0.5% and 0.9%, respectively, ahead of their results, which are due after markets close. Alphabet and Tesla were down 0.1% and 0.6%, respectively.

AI-trade favorite Nvidia rose 0.60%, a day after adding about $330 billion to its market value, a record one-day gain for any Wall Street company.

At 5:23 a.m. ET, Dow e-minis were down 18 points, or 0.04%, S&P 500 e-minis were up 12.5 points, or 0.22%, and Nasdaq 100 e-minis were up 62.25 points, or 0.32%.

The S&P 500 and the Nasdaq scored their biggest one-day gains since Feb. 22 on Wednesday, after Fed Chair Jerome Powell offered the stock market what it has been seeking - a likely pivot to policy easing in September, with inflation on track to finish the journey to 2% without undue damage to the labor market.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., June 14, 2024. REUTERS/Brendan McDermid/File Photo

However, as the prospect of rate cuts gained traction, investors are now trying to gauge if the central bank will be able to ease policy at a pace consistent with achieving the much awaited "soft landing" for the economy.

Futures tracking the Russell 2000 also rose 0.5% after the small-cap index logged its biggest monthly gain in July since the start of 2024, on hopes that mid- and small-cap companies will benefit from a low-interest-rate environment.

Economic data including weekly jobless claims and manufacturing PMIs, due through the day, is at the top of investors' watch list.

Most chip stocks retreated after Wednesday's rally saw the Philadelphia SE Semiconductor index log its best one-day gain of 7% since November 2022.

Arm Holdings slumped 10.7% following a conservative revenue forecast, while Qualcomm lost 1.9% on flagging a revenue hit after the U.S. revoked one of its export licenses for sanctioned Chinese telecom firm Huawei.

Western Digital Corp dropped 6.2% after forecasting first-quarter revenue below estimates.

Of the 283 S&P 500 companies that have reported second-quarter earnings till date, 78.4% beat expectations, LSEG data showed.

(Reporting by Ankika Biswas in Bengaluru; Editing by Pooja Desai)

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