Dow Futures remained muted as investors evaluated a new set of earnings from the technology sector while anticipating the upcoming American midterm elections. Apple and Palantir shares experienced a decline in after-hours trading following the release of their most recent quarterly reports. Meanwhile, artificial intelligence and affordability are poised to be significant concerns for American voters.
Dow futures fluctuated around the neutral point on Tuesday. By 02:56, the S&P 500 futures contract had decreased by 14 points, or 0.2%, while Dow futures had declined by 260 points, or 0.5%. Nasdaq 100 futures, in contrast, increased by 21 points, representing a 0.1% rise. The primary indices on Wall Street exhibited a mixed performance in the previous session. Stocks experienced initial support from a decrease in oil prices, attributed to optimism regarding a potential de-escalation in the Iran conflict. However, the sentiment was dampened by the performance of tech stocks, reflecting a continuation of the downturn observed in the previous week. The tech-heavy Nasdaq Composite retreated by 1.07%, reflecting ongoing concerns regarding the sustainability of debt- and equity-driven expenditures on an accelerated artificial intelligence infrastructure development. “[I]f the debt and equity can’t be absorbed, industry capex will inevitably be dialed back,” analysts said in a note.
Shares of Apple declined in after-hours trading following disappointing margin guidance from the iPhone manufacturer. Fiscal fourth-quarter earnings per share increased by 14% to $2.10, supported by a rise in sales to $114.5 billion. Both figures surpassed the expectations set by Wall Street. However, sales of $17.5 billion in Apple’s key Chinese market fell short of forecasts, as did demand in Japan, while free cash of $26.8 billion was below consensus projections – despite being high relative to other tech players making substantial investments into their AI ambitions. Apple shares have surged by over 24% this year, bolstered by the company’s standing as a refuge amid concerns surrounding AI. In a note, analysts said Apple’s numbers reinforced their view that underlying hardware demand is healthy in spite of recent price increases, although “the debate is increasingly shifting toward margins and [earnings per share] power” as the cost of memory chips soars. “Structurally, we expect [Apple] to navigate a choppy [gross margin] environment till we start to see memory pricing stabilize (or come down),” they wrote. Apple informed investors during a post-earnings call that gross margins for the current quarter are projected to fall within the range of 45% to 46%. This figure is below the anticipated 47% and may pose a significant challenge for the new CEO, John Ternus.
Palantir shares experienced a decline in after-hours trading, influenced by a weak indicator of future revenue that overshadowed otherwise robust third-quarter results. The AI-focused data analytics group reported earnings per share of $0.44, propelled by a 96% increase in sales to $2.31 billion, which was supported by strong commercial and government contracts in the United States. The two numbers, together with a fourth-quarter outlook for sales of $2.649 billion to $2.653 billion and operating income of $1.64 billion to $1.644 billion, exceeded estimates. Analysts have indicated that the growth in total contract value, which serves as a gauge for the overall dollar amount of contracts signed within the quarter and provides insights into potential future sales, has decelerated to 6% compared to the same period last year. In the second quarter, the figure was recorded at 49%. In a recent note, analysts remarked that Palantir delivered “another spectacular print, but the noisy bookings metric will likely result in a subdued stock reaction.”
As AI assumes a pivotal role in quarterly earnings, this emerging technology may influence the current American midterm elections. At play is the control over the two chambers of the U.S. Congress, which is presently characterised by majorities from President Donald Trump’s Republican Party. Some voters have articulated apprehensions regarding the implications of AI on employment and the expansion of substantial data centers essential for supporting advanced AI systems. Trump has positioned himself as a proponent of the AI sector, contending that the United States must outpace its competitor, China, in the pursuit of leveraging this technology. In addition to AI, affordability challenges may emerge as a pivotal concern for American voters as they approach the polls. Energy prices have surged since the onset of Trump’s conflict with Iran, contributing to rising costs for goods such as petrol and diesel. Nevertheless, robust consumer spending and investments in AI have supported broader economic growth in the United States.
Oil prices experienced a modest increase on Tuesday following a significant decline in the prior session. This uptick was influenced by reports of a U.S. strike on Iran’s Qeshm Island, which reignited worries regarding potential disruptions to supply in the Middle East. The United States conducted an attack on Iran’s Qeshm Island on Monday, according to reports from U.S. officials. The strike constituted one element of a sequence of constrained U.S. assaults on Iran in the preceding weeks, according to the report, as Washington aimed to prevent any indication of a reversion to a more extensive military engagement. Qeshm is situated in the Strait of Hormuz, an essential passage for international oil transportation. The reported attack underscored the delicate equilibrium between military escalation and diplomatic initiatives aimed at resolving the conflict, maintaining traders’ vigilance regarding the potential for additional disruptions to oil flows in the Gulf. Crude prices experienced a decline on Monday as U.S. officials indicated a preference for negotiations, alleviating fears that Washington might reinitiate a broader military campaign after the U.S. midterm elections.
