US Stock Futures Fall as Alphabet Earnings Disappoint and Trade Tensions Rise

US stock index futures declined on Wednesday, dragged down by weak earnings from Alphabet and renewed US-China trade tensions.

Stock Futures Performance (06:00 ET / 11:00 GMT)

• Dow Jones Futures: ↓ 80 points (-0.2%)
• S&P 500 Futures: ↓ 30 points (-0.5%)
• Nasdaq 100 Futures: ↓ 195 points (-0.9%)

On Tuesday, Wall Street posted gains, with optimism fueled by Trump’s decision to delay tariffs on Mexico and Canada, raising hopes for more flexible trade negotiations with China.

• S&P 500: ↑ 0.7%
• Nasdaq Composite: ↑ 1.4%
• Dow Jones Industrial Average: ↑ 0.3%

Alphabet (GOOGL) Tumbles on Weak Q4 Earnings

• Alphabet shares dropped 7% premarket after Q4 revenue missed expectations, with disappointing performance from its cloud division, which is a key part of its AI strategy.
• The company announced $75 billion in AI investments for 2024, significantly higher than the $58 billion forecasted by analysts.
• Wall Street has become increasingly wary of escalating AI-related spending, especially after China’s DeepSeek R1 AI model showed strong capabilities on a smaller budget.

Apple Under Pressure as Beijing Weighs Investigation

• Apple (AAPL) shares declined premarket after Bloomberg reported that Chinese regulators are considering an antitrust probe into Apple’s App Store fees and policies.
• The move comes amid rising trade tensions, following Trump’s 10% tariffs on China, prompting Beijing’s retaliatory tariffs and export controls.
• China also launched an antitrust investigation into Google, signaling potential broader scrutiny of US tech firms.

Trade War Concerns Weigh on Market Sentiment

• Trump indicated no urgency to negotiate with China’s President Xi Jinping, suggesting that tariffs will remain for the foreseeable future.
• Analysts warned that higher tariffs could drive inflation and slow economic growth, particularly if US importers pass costs to consumers.

More Earnings on Tap

Several major companies are set to report earnings on Wednesday:

• Uber (UBER)
• Walt Disney (DIS)
• Qualcomm (QCOM)
• MicroStrategy (MSTR)

Stock Movers Premarket

• Snap (SNAP): ↑ after better-than-expected earnings and strong digital ad revenue growth.
• AMD (AMD): ↓ after Q4 data center revenue missed expectations ($3.9B vs. $4.15B consensus).
• Chipotle (CMG): ↓ 6% after Q4 same-store sales growth fell short of forecasts.

Key Economic Data to Watch

• ADP private payrolls report ahead of Friday’s Nonfarm Payrolls (NFP) report.
• Tuesday’s job openings data showed a larger-than-expected decline, signaling a gradual labor market cooldown.

Market Outlook

Investors are closely watching earnings, trade developments, and economic data, as higher tariffs and slowing tech growth could pressure stocks and inflation expectations.

• Earnings Season: The strong start to the earnings season, with several companies exceeding expectations, has further fueled the market rally.

• Economic Data: While mixed, recent economic data points, such as the rise in Eurozone new car registrations, have provided some support for global growth prospects.

Notable Market Movers:

Upside: Moderna led gains after receiving additional government funding for its bird flu vaccine. 3M Co. also saw significant gains following strong quarterly earnings.

Downside: Apple shares experienced a significant decline following weaker-than-expected iPhone sales in China. Walgreens Boots Alliance suffered heavy losses after facing legal action from the Justice Department.

What’s Next for US Stocks?

The market remains sensitive to developments on the trade front. While the immediate threat of tariffs on China and Europe has receded, the ongoing trade disputes with other nations and the potential for further escalation pose significant risks. The Federal Reserve’s monetary policy decisions will also continue to influence market sentiment.

The Dow Jones Industrial Average rose by 1% on Tuesday, with the S&P 500 and Nasdaq Composite also rising. 3M’s earnings came in better than analysts expected, and small-cap stocks like the Russell 2000 also participated in the rally. Amazon and Alphabet each gained more than 2%, while Apple’s drop of over 4% was weighed on the tech-heavy Nasdaq.

Trump said he was considering 25% tariffs on Mexico and Canada due to their border policies and mentioned China, noting that the U.S. could impose tariffs on the country if it doesn’t approve a TikTok deal. He issued a broad memorandum directing federal agencies to study unfair trade policies with foreign countries, but stopped short of authorizing new levies on his first day back in the Oval Office. Trump’s policy announcements on tariffs were more benign than expected, and that it is a lower priority than previously expected, according to some observers and experts.

Outside of trade policy, Wall Street is focused on Trump following through on pro-business proclamations made throughout his campaign, such as his calls for looser regulations that helped lift banking banking stocks following his election win in November. Other components of the so-called Trump trade, including small caps, oil stocks, and bitcoin, will likely be hypersensitive to what his administration does. In his inaugural address, the president labeled his return to the White House as the beginning of a period of growth and success for the country, while largely condemning the Biden Administration.