US stock futures mixed before Fed; Microsoft drops on disappointing earnings

Investing.com-- S&P futures were flat and Dow futures fell in evening deals on Tuesday as investors hunkered down before a decision on interest rates from the Federal Reserve, while disappointing earnings from Microsoft weighed on major technology stocks.

But Nasdaq futures rose, aided by a rebound in chipmaking stocks following stronger-than-expected earnings from AMD, which showed artificial intelligence still remained an earnings driver for the sector.

S&P 500 Futures steadied at 5,476.75 points, while Dow Jones Futures fell 0.4% to 40,795.0 points by 19:39 ET (23:39 GMT). Nasdaq 100 Futures rose 0.4% to 19,021.0 points. 

Microsoft cloud revenue misses estimates despite spending increase

Microsoft Corporation (NASDAQ:MSFT) fell more than 3% in afterhours trade after its fourth-quarter cloud revenue growth missed Wall Street estimates. The stock had fallen as far as 7%, but pared losses after it said on an earnings call that cloud growth would accelerate in the coming quarters. 

While the firm’s overall earnings just edged past estimates for the June quarter, revenue from Azure, the company’s cloud business, grew 29%, missing estimates of 30.2% and also slowing from the 31% rise in the prior quarter. This came even as investment in AI saw capital expenditure surge by $5 billion in the quarter. 

Azure is Microsoft’s main platform for its AI offerings, and serves as a barometer for demand for the sector. The Redmond, Washington-based tech giant is among the frontrunners on Wall Street to monetize AI, having tied up with OpenAI to release a slew of products over the past year. 

Microsoft’s earnings sparked losses across most of its heavyweight tech peers, given that they came just a week after earnings from Alphabet Inc (NASDAQ:GOOGL) showed a similar trend.

Amazon.com Inc (NASDAQ:AMZN) and Meta Platforms Inc (NASDAQ:META), which are set to report earnings on Wednesday, fell 1% and 0.7%, respectively, while Apple Inc (NASDAQ:AAPL), which will report earnings on Thursday, fell 0.5%. 

Chipmakers rebound on strong showing from AMD

Advanced Micro Devices Inc (NASDAQ:AMD) surged over 8%, while rival NVIDIA Corporation (NASDAQ:NVDA) added 5.4% after AMD clocked stronger-than-expected earnings and forecast upbeat revenue for the current quarter, citing strong demand from AI. 

AMD’s earnings sparked gains across chipmaking stocks. But they highlighted a potential division in AI-fueled earnings- where the suppliers of AI-related equipment appeared to be faring better than their customers, especially following Microsoft’s disappointing showing. 

A measure of bargain buying also aided chipmakers, after heavy losses on Tuesday and over the past two weeks. 

Wall Street nurses losses with Fed on tap

Wall Street indexes ended lower on Tuesday as investors pivoted from tech and into more economically sensitive sectors amid caution over the Fed and major tech earnings.

The Fed is widely expected to keep rates steady at the conclusion of a meeting on Wednesday. But any signals on its plans to cut rates will be closely watched, as recent inflation data fueled growing conviction the Fed will begin cutting in September.

The S&P 500 fell 0.5% to 5,436.44 points on Tuesday, while the NASDAQ Composite fell 1.3% to 17,141.98 points. The Dow Jones Industrial Average outperformed, rising 0.5% to 40,743.33 points.