Futures dip as chip stocks drag, Fed rate decision awaited

[May 01, 2024]  By Shristi Achar A and Shashwat Chauhan

(Reuters) - U.S. stock index futures fell on Wednesday as chip stocks led losses after downbeat results and markets exercised caution ahead of more economic data and the Federal Reserve's interest rate decision later in the day.

Advanced Micro Devices shed 6.7% in premarket trading after its forecast for AI chip sales failed to impress investors, while Super Micro Computer lost 11.5% as the artificial intelligence server maker reported third-quarter revenue below estimates.

The weak results pressured other chip stocks as well, with Nvidia and Micron Technology down more than 1% each.

While most megacap growth stocks fell, Amazon.com bucked the trend to rise 2.2% on reporting quarterly results above market expectations as interest in artificial intelligence helped drive cloud-computing growth.

Investors will now await a slew of economic data during the day to further gauge the state of inflation in the U.S. economy, before tuning in to the Fed's interest rate decision at the end of its two-day meeting.

On the docket for the day are the ADP National employment numbers for April at 8:15 a.m. ET, the April S&P Global final manufacturing PMI data shortly after the opening bell, the ISM manufacturing PMI data and the JOLTS job openings figures, both at 10 a.m. ET.

"FOMC meeting is likely to confirm that, from a global perspective, the script has flipped," said Brendan Murphy, head of global fixed income, North America, at Insight Investment.

"Everyone thought the Fed would be the first or one of the first central banks to cut rates this cycle, now it looks like it will be one of the last."

Money markets expect the U.S. central bank to stand pat on rates later in the day, pricing in just about 28 basis points (bps) of rate cuts this year, down from around 150 bps seen at the start of 2024, according to LSEG data.

A trader works inside a booth, as screens display a news conference by Federal Reserve Board Chairman Jerome Powell following the Fed rate announcement, on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., July 26, 2023. REUTERS/Brendan McDermid/File Photo

A sharp pullback in rate cut bets and tensions in the Middle East made April a rough month for U.S. equities, with all three stock indexes posting their first monthly loss in six.

Their performance in May will be put to the test as the rest of the first-quarter earnings season continues and the interest rate outlook becomes clearer.

Over the last 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 adage "Sell in May and Go Away".

At 07:00 a.m. ET, Dow E-minis were down 87 points, or 0.24%, S&P 500 E-minis were down 20.25 points, or 0.4%, and Nasdaq 100 E-minis were down 109.25 points, or 0.62%.

Among other movers, Starbucks dropped 12.8% as the coffee giant cut its annual sales forecast after reporting a fall in same-store sales for the first time in nearly three years.

CVS Health shed 10.7% after the healthcare giant slashed its annual profit forecast and missed Wall Street estimates for first-quarter earnings.

(Reporting by Shristi Achar A and Shashwat Chauhan in Bengaluru; Editing by Devika Syamnath)

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