Wall Street is anticipated to decline on Thursday, with European markets also falling amid concerns about how quickly investors can expect returns from artificial intelligence (AI), following warnings from Meta. Future indices indicate a drop for major US indexes. In Europe, the CAC 40, DAX, and FTSE 100 are all down. Meta’s results surpassed expectations, but increased infrastructure spending warnings have unsettled investors. Added caution prevails ahead of US employment reports and a closely watched presidential election.
By Pauline Foret
(Reuters) – Wall Street is projected to open lower on Thursday, with European markets also declining mid-session. Investors remain concerned about how quickly shareholders can expect returns on investments related to artificial intelligence (AI), following warnings from Meta that overshadowed recent growth data from the world’s largest economy.
New York index futures indicate a downward opening for Wall Street, with the Dow Jones down 0.44%, the S&P 500 dropping 0.59%, and the Nasdaq falling 0.66%.
In Paris, the CAC 40 is down 1.01% at 7,353.16 points around 12:23 GMT. Frankfurt’s DAX has decreased by 0.56%, while London’s FTSE 100 has retreated by 0.72%.
The EuroStoxx 50 index is down 0.84%, the FTSEurofirst 300 is off by 0.88%, and the Stoxx 600 has declined by 0.89%.
Alongside the announcement of better-than-expected results, Meta warned of a “significant acceleration” in its infrastructure expenses next year, attributing it to depreciation and higher operational costs related to its expanded AI infrastructure.
The company does not anticipate immediate returns from these investments, prompting closer scrutiny from investors regarding its expenditures. Amid these concerns, major tech stocks are struggling, impacting key indices ahead of Amazon and Apple’s earnings reports expected later today.
Global markets remain cautious ahead of the U.S. employment report and just days before the presidential election, which is expected to be particularly competitive.
Speculation is also high concerning the future of the Federal Reserve’s monetary policy, as data released Wednesday indicated the U.S. economy grew by 2.8% year-on-year in the third quarter, surpassing the 2% mark for the eighth time in the last nine quarters, according to Michael Brown, a strategist at Pepperstone.
In Europe, stocks are pressured by BNP Paribas’ decline following a release of its quarterly results and technology shares like ASMI and SAP.
STOCKS TO WATCH ON WALL STREET
Meta Platforms, which owns Facebook, reported quarterly results that exceeded expectations; however, it cautioned about a “significant acceleration” in AI-related infrastructure spending. Its shares on the Frankfurt Stock Exchange fell by over 3%.
Microsoft also reported quarterly earnings that surpassed Wall Street’s forecasts, benefiting from increased demand for its cloud services amidst the AI hype. Following concerns about the swift return on AI investments, shares in Frankfurt declined by 4.04%.
In the wake of Microsoft and Meta’s results, major tech stocks like Nvidia, Amazon, and Alphabet all saw a decrease of about 1.3% before the market opened.
On the economic front, preliminary harmonized inflation data from France showed an increase of 1.5% in October, while German retail sales experienced a surprising growth in September. In the eurozone, inflation rose again to reach 2% in October.
EUROPEAN STOCKS
In Paris, BNP Paribas dropped 5.7% after its consumer credit and auto leasing operations underperformed in the third quarter.
Conversely, Société Générale rose by 9.41% after reporting better-than-expected results for the third quarter, driven by a rebound in retail banking and strong performance in equity markets while announcing a leadership reshuffle.
Spie saw a decline of 6.4%, with the French company’s organic growth and production not meeting analyst expectations.
In Zurich, SoftwareOne plummeted by 39.4% after it significantly lowered its annual revenue forecast on Thursday.
INTEREST RATES
Bond yields were affected on Thursday by growth that was slightly below expectations for the U.S. economy in the third quarter, along with solid consumer spending and private sector data.
The yield on ten-year Treasuries increased by 1.4 basis points to 4.2783%, while the two-year yields climbed by 2.7 basis points to 4.1764%.
The yield on Germany’s ten-year Bund rose by 3.9 basis points to 2.4130%, and the two-year yield increased by 4.5 basis points to 2.3280%.
CURRENCIES
Ahead of personal consumption expenditures (PCE) data from the U.S. and the employment report due on Friday, as well as less than a week before the presidential elections