US tech stocks were set to open higher on Wednesday, as investors cheered Microsoft’s earnings and looked towards more big-name reports and a Federal Reserve interest-rate decision.
Futures for the Nasdaq 100 index – which is loaded up with big tech names – rose 0.48% on Wednesday. S&P 500 and Dow Jones futures slipped 0.16% and 0.31% respectively, however, as investors took a breather after recent record highs. The dollar rose and bonds were little changed.
Asian stocks were mixed overnight after a sharp sell-off on Tuesday, which was driven by tighter credit conditions in China and worries about new coronavirus cases. China’s CSI 300 edged 0.27% higher overnight, while Japan’s Nikkei 225 rose 0.31%. Hong Kong’s Hang Seng slipped 0.11%.
European stocks slipped in early trading. Investor focus switched to the near-term problems faced by economies, including worries about the rollout of vaccines. The Europe-wide Stoxx 600 was off by 0.34%.
The small movements in major stocks contrasted with the wild volatility in smaller names that has recently left big investors speechless.
Emblematic of this trend is the more than 600% rise in video-game retailer GameStop’s share price over the last month, driven largely by the Reddit group Wallstreetbets. GameStop was up more than 100% in pre-market trading.
The record rise has hit short sellers hard and divided opinions sharply. On Wednesday, “Big Short” investor Michael Burry, who took a bullish view of GameStop in 2019, tweeted the price moves are “unnatural” and “insane”.
In the more traditional parts of the market, investors’ focus on Wednesday will turn to big-name earnings and the Fed.
Microsoft’s shares were 3.64% higher in pre-market trading after it posted a 17% rise in sales in the latest quarter. The rise helped lift Nasdaq futures. Apple, Facebook and Tesla are all due to report earnings later on Tuesday.
Milan Cutkovic, market analyst at trading platform Axi, said: “Microsoft reported strong figures as the pandemic continues to boost its cloud computing business.”
“Apple and Facebook, both of which will publish their latest numbers today, are likely to beat expectations too and add fresh fuel to the tech rally.”
The Federal Reserve is expected to keep monetary policy on hold later on Wednesday and chairman Jay Powell will address reporters. Michael Gapen of Barclays said in a note: “The main information will come from the press conference.”
He added: “There, we expect Chair Powell to emphasize that the economy has a long way to go to recover fully and it remains premature to talk about [bond-buying] exit strategies.”
Government bonds were mixed, with little price movement either way. The yield on the 10-year US Treasury was up 0.7 basis points to 1.047%. Yields move inversely to price.
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Bitcoin – struggling for attention as a swarm of day-traders focused on GameStop – was down 2.8% to $31,385.
Markets around the world have taken something of a pause after surging at the start of January due to optimism about coronavirus vaccines and stimulus. Nonetheless, US stocks continue to trade around all-time highs, with investors betting on a 2021 economic rebound.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said: “We see reasons equities should continue to rise despite the recent concerns and so, continue to hold a positive outlook on stocks and see cyclically sensitive markets leading the way as the global recovery broadens.”
Oil prices rose on Wednesday morning as traders anticipated higher demand. The global benchmark Brent crude price was up 0.74% to $56.05 per barrel. The US benchmark WTI price was 0.7% higher at $52.98 a barrel.