Stocks Fall as Caution Builds Ahead of Alphabet: Markets Wrap
(Bloomberg) — Stocks fell ahead of Alphabet Inc.’s earnings as traders waited for the clearest read yet on whether the vast sums technology hyperscalers are pouring into artificial intelligence will pay off.
A two-day rebound in the Nasdaq 100 came to a halt, with index futures dropping 0.7%. South Korea’s Kospi Index and other tech-heavy gauges in Asia trimmed strong early-session gains. The technology sector lagged sharply in Europe’s Stoxx 600. S&P 500 contracts were down 0.3%.
Higher crude prices also kept a lid on sentiment after both the US and Iran signaled they were in no mood to restart talks following an escalation in their conflict in the Middle East. Brent rose 3% toward $94 a barrel, extending its surge to nearly 30% in July after hostilities resumed.
After Alphabet said last quarter that it plans to more than double capital spending from 2025 to as much as $190 billion this year, investors will be watching closely for evidence that those investments are generating returns. Yet the companies building the global AI infrastructure need that spending growth to continue to justify their stellar share-price gains.
Alphabet’s report will come just as market-leading chipmakers have been gripped by intense volatility amid fears that the current pace of AI spending cannot be sustained.
“Risk appetite remains reasonably strong, even as higher energy prices drive interest rates to new highs,” noted Chris Turner at ING Bank NV. “The former is heavily predicated on the AI-investment boom continuing to deliver on its promise of future earnings.”
In Wednesday’s second major earnings event, investors will want to see Tesla Inc. spending enough to deliver AI-driven progress. Unlike most other tech giants, an uptick in capital spending and a higher outlook for AI outlays would likely give the shares a boost. The stock is down 16% so far this year.
Meanwhile, the yen edged higher after people familiar said Bank of Japan officials are open to raising interest rates at a faster pace than economists expect, with the currency’s continued weakness adding to upside inflation risks.
Treasury yields held near two-month highs as higher oil prices kept inflation fears elevated. Gilts outperformed European bonds on a softer-than-expected UK inflation print. The dollar and pound were little changed.
Corporate News:
Super Micro Computer Inc. shares rose as much as 19% in premarket trading after the server maker issued preliminary results saying its backlog hit a record on new orders in the quarter of more than $60 billion. Cathay Pacific Airways Ltd. expects a jump in first-half net income, driven by strong passenger and cargo demand. Banco Santander SA posted second-quarter net income that beat analyst estimates as it continued to add millions of customers. Equinor ASA said second-quarter earnings exceeded expectations as higher natural gas prices in Europe and a boost to its oil trading business from the Iran war drove up profit. Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.4% as of 9:36 a.m. London time S&P 500 futures fell 0.3% Nasdaq 100 futures fell 0.7% Futures on the Dow Jones Industrial Average fell 0.1% The MSCI Asia Pacific Index was little changed The MSCI Emerging Markets Index fell 0.2% Currencies
The Bloomberg Dollar Spot Index was little changed The euro rose 0.1% to $1.1411 The Japanese yen rose 0.1% to 163.00 per dollar The offshore yuan was little changed at 6.7735 per dollar The British pound was little changed at $1.3380 Cryptocurrencies
Bitcoin fell 0.6% to $65,974.23 Ether was little changed at $1,920.76 Bonds
The yield on 10-year Treasuries was little changed at 4.62% Germany’s 10-year yield was little changed at 3.17% Britain’s 10-year yield declined one basis point to 5.02% Commodities
Brent crude rose 3% to $93.72 a barrel Spot gold rose 1% to $4,118.37 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Neil Campling, Cecile Gutscher and Subrat Patnaik.
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