Investing.com-- Futures linked to the S&P 500 and the Nasdaq 100 indexes showed little movement in premarket trade, mostly maintaining positions near record highs in anticipation of key earnings reports from major banks such as JPMorgan, Citigroup, and Wells Fargo (NYSE:WFC). These reports are set to propel the second-quarter earnings season forward.
At 06:11 AM EST (10:11 GMT), the S&P 500 futures were up 0.15% while Nasdaq futures rose 0.1%.
JPMorgan Chase (NYSE:JPM), the largest bank in the United States, is projected to post a drop in its quarterly earnings. Wells Fargo and Citi are also scheduled to report today.
Investors are looking forward to robust profit growth from a diverse range of companies, which could potentially extend the rally in U.S. stocks beyond the dominant tech sector.
"If analysts’ predictions are accurate, this quarter’s year-over-year EPS growth rate will be the highest since the fourth quarter of 2021," Bernstein analysts wrote in a note.
Tech-heavy Nasdaq suffered a setback of nearly 2% on Thursday. This decline was influenced by a shift in investor interest from large-cap stocks to smaller companies amid increasing expectations that the Federal Reserve will slash rates in September.
Market participants are now pricing in an 86% chance of a rate cut by the Federal Reserve in September, an increase from the 72% probability observed a week prior.
Tesla (NASDAQ:TSLA) extends losses after UBS downgrade
Tesla stock fell a further 1.7% during Friday's premarket trading session after UBS downgraded the stock's rating from Neutral to Sell.
The brokerage firm acknowledged the positive developments in Tesla's diverse business areas but expressed concerns over the heightened expectations for its core Automotive division.
The analysts pointed out that Tesla has historically enjoyed a premium valuation due to anticipated growth in various initiatives, particularly in artificial intelligence (AI). Despite Tesla's current market capitalization reflecting over $500 billion in value for future growth, the analysts argued that justifying a Buy rating would require an even greater growth opportunity.
While recognizing the progress in AI, UBS cautioned that the investment is expensive, the pace of improvement could decelerate, and the return on investment is likely to be realized in the distant future. They suggested that a waning market enthusiasm for AI could adversely affect Tesla's stock multiple.
The recent reversal in Tesla's stock price ends an 11-day rally, which was initially sparked by a robust second-quarter deliveries report that temporarily eliminated the stock's year-to-date losses.
With the latest decline, Tesla's shares have once again dipped into negative territory for the year 2024.
Asian tech slammed by profit-taking, Nikkei slides 2%
Tech-heavy indexes in Asia, which had mostly outpaced their regional peers in recent weeks, clocked the heaviest losses on Friday. The sector saw a heavy degree of profit-taking after hype over AI sparked a major melt-up in valuations this year.
Traders were seen pivoting into other economically-sensitive sectors, which are now set to benefit from lower interest rates.
Japan’s Nikkei 225 was emblematic of this trend, slumping 2.2% from record highs hit on Thursday. The broader TOPIX, which is a lot less tech-heavy than the Nikkei, fell 0.9%. Chipmakers Renesas Electronics Corp (TYO:6723), Advantest Corp. (TYO:6857) and Tokyo Electron Ltd. (TYO:8035) slid between 4% to 7%, while tech investment house SoftBank Group Corp. (TYO:9984) lost 3.2%.
South Korea’s KOSPI slid 1.4% with memory chip making major SK Hynix Inc (KS:000660) losing over 3%.
TSMC (TW:2330) (NYSE:TSM), the world’s biggest contract chipmaker, and a key driver of the recent tech rally, slid over 4% from record highs.
Hong Kong outperforms on bargain buying, ASX hits record high
But major Chinese technology stocks largely ducked weakness in their global peers, as relatively lower valuations in the sector drove in a slew of bargain hunting.
Hong Kong-listed Chinese tech majors such as Baidu (NASDAQ:BIDU) Inc (HK:9888), Alibaba Group Holding Ltd (HK:9988) and Tencent Holdings Ltd (HK:0700) rose over 2% each, which helped the Hang Seng index rally 2%. The index also pulled further away from a two-month low hit earlier this week.
Chinese markets fell less than their broader peers, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes treading water on Friday.
Australia’s ASX 200 outperformed its Asian peers, rising 0.9% to a record high of 7,969.10 points. The index, which has a relatively small weightage of technology stocks, was boosted by flows into economically sensitive sectors such as mining and industrials.
These sectors advanced across the board in Asia, given that they are expected to benefit from a low interest rate environment.
Futures for India’s Nifty 50 index pointed to a flat open, with gains in industrials and consumer stocks set to offset losses in tech. The Nifty and the BSE Sensex 30 had both scaled record peaks earlier this week amid persistent optimism over the Indian economy.
This content was originally published on Investing.com
