Stock Futures Signal Rebound as Dip Buyers Snap Up Tech Shares
US equity futures pushed higher early Wednesday as traders snapped up technology shares after a pullback in the group, with enthusiasm around strong earnings outweighing a resurgence in inflation.
Contracts on the S&P 500 Index rose 0.2% as of 8:06 a.m. in New York, while those on the Nasdaq 100 Index gained 0.7%. Chipmakers, opticals and storage firms were advancing as supply for global memory chips, critical to artificial intelligence infrastructure build-outs, tightened further. Nvidia Corp. climbed 2.3% as Chief Executive Officer Jensen Huang is joining President Donald Trump on his visit to China.
Trump repeated his military threats against Iran ahead of his China trip. Tehran’s effective closure of the Strait of Hormuz will be at the top of the agenda in talks between the US president and China’s President Xi Jinping.
Investors are brushing aside the hottest yearly inflation print since 2023 as robust corporate earnings and the profit potential of AI continue to underpin confidence in the economy and stock market. First-quarter profits at S&P 500 companies have surged 27% so far, more than double the roughly 12% analysts had expected — the fastest year-on-year earnings growth outside of recoveries from major shocks since 2004.
Optimism surrounding the potential for industrial companies to profit from the AI boom has also fueled record-setting momentum in the sector.
A gauge of 45-day correlation between the S&P 500 Industrials Sector, home to stocks like Deere & Co. and Fastenal Co., and the Philadelphia Stock Exchange Semiconductor Index is sitting at 0.75, near the highest level since June. A reading of 1 means the securities move in lockstep. Worries are mounting that the group’s link to AI may be getting too tight.
To Max Kettner, chief multi-asset strategist at HSBC Holdings Plc, stocks can rally further as a powerful recovery in earnings and still-low positioning outweigh the threat from rising bond yields. The reporting season has been “crazy, just absolutely crazy,” with almost 87% of companies beating expectations in a performance that resembled the post-Covid reopening, he said in an interview with Bloomberg Television.
Equities remain the most favored asset class in the global allocations, with a preference for the US driven by a better risk-reward profile and earnings potential, according to Morgan Stanley’s cross-asset strategists.
In individual company news, Claude-maker Anthropic PBC is in early talks with investors to raise at least $30 billion in fresh financing, according to people familiar with the matter, setting the stage for what could be its largest funding round yet.
SoftBank Group Corp. reported a surge in quarterly profit due to valuation gains on its OpenAI investment. US-listed shares of Alibaba Group Holding Ltd. were down after the online marketplace’s fourth-quarter results were weaker than expected on key metrics.
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