Traders at the New York Stock Exchange (NYSE) in New York City saw the tech-heavy Nasdaq 100 futures fall Tuesday night after two major tech companies reported their quarterly results. Wall Street also awaited the Federal Reserve’s decision on rate policy. Nasdaq-100 futures dropped 0.8%. S&P 500 futures dipped 0.4%, while Dow Jones Industrial Average futures gained 20 points, or less than 0.1%.In after-hours trading, Alphabet shares went down by 5.5%, while Microsoft remained nearly unchanged after the tech giants posted their quarterly earnings. Although both companies exceeded expectations on both revenue and profit, Alphabet’s ad revenue fell short of analysts’ forecasts. The decline in Alphabet and Microsoft shares, despite their largely positive results, could be attributed to a short-term “buy on rumors, sell on news” trend, according to Sam Stovall, chief investment strategist at CFRA Research.”Even if you’re getting better-than-expected results, people may be selling because they just want to take the money and run,” he said. The tech sector, which has been driving the market rally from 2023 to 2024, is currently trading at a relatively high valuation of nearly 29 times its 2024 earnings, as stated by Stovall. Therefore, investors will need to witness earnings growth in order for the tech companies to maintain their elevated price-to-book levels, according to the strategist. “It’s not that investors will be willing to pay up and have multiple expansion later, but rather — now it’s time to put up or shut up,” Stovall said. “It’s time to increase the earnings to justify these higher valuations.”This follows a mixed day for stocks, with the S&P 500 slightly declining by 0.06%, and the Nasdaq Composite dropping 0.76%. However, the Dow outperformed, adding 0.35%.The Fed’s rate decision will be top of mind for traders on Wednesday. The fed funds futures market has implied a nearly 98% chance that the central bank will keep rates unchanged, as shown by the CME FedWatch tool. Investors will be searching for indications of changes in the central bank’s policy stance in its post-meeting statement and in Fed Chair Jerome Powell’s comments.Policymakers will probably adopt a “later and fewer approach,” where the Fed begins reducing rates later than what most of the market is anticipating, according to Stovall. “The Fed doesn’t want to repeat the mistakes of the past about being too aggressive with the rate cuts,” Stovall said.On the earnings front, Boeing, a Dow member, will be announcing its results Wednesday before the market opens. Chipmaker Qualcomm is set to report its quarterly earnings after the market closes.
