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Futures edge lower, Microsoft rises on AI push


Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 27, 2023. REUTERS/Andrew Kelly

U.S. stock index futures edged lower on Wednesday as investors assessed comments from Federal Reserve Chair Jerome Powell on how long it may take control inflation, while a rise in shares of Microsoft kept losses in check.

Powell said on Tuesday he expects 2023 to be a year of “significant declines in inflation”.

However, he also said the battle against inflation will take quite a bit of time, acknowledging that interest rates may need to move higher than expected.

“The underlying worries about just how high rates will have to go are bubbling to the surface again, following yesterday’s exuberance over indications that disinflationary forces were taking hold,” Susannah Streeter, markets analyst at Hargreaves Lansdown, said.

“The see-saw sentiment is set to continue as investors wait for fresh data to filter through, which they hope will throw fresh light on the direction of Fed policy.”

Powell’s comments, which came after a strong jobs report on Friday, pushed Wall Street’s main indexes higher on Tuesday, with the S&P 500 (.SPX) up 1.29% and the Nasdaq adding (.IXIC) 1.90%.

U.S. equities have had a strong start in 2023, after taking a hit last year, led by battered megacap growth stocks on optimism the Fed will temper its aggressive rate hikes.

Microsoft Corp (MSFT.O) climbed 1.9% in premarket trading after the tech giant said it was revamping its Bing search engine and Edge Web browser with artificial intelligence.

Traders will closely monitor comments from a slew of Fed officials later in the day for more hints on the central bank’s path of future interest rate hikes.

Money market participants see the Fed’s terminal rate at 5.14% by July, with a 98.5% chance of a 25-basis point rate hike in March.

Walt Disney Co (DIS.N), CVS Health Corp (CVS.N), Uber Technologies Inc (UBER.N) and Yum Brands Inc (YUM.N) will report their quarterly earnings later in the day.

So far, more than half of the S&P 500 companies have reported quarterly earnings, with 69.1% of them beating expectations, according to Refinitiv. Still, analysts expect fourth-quarter earnings to decline 3.1%.

At 5:50 a.m. ET, Dow e-minis were down 55 points, or 0.16%, S&P 500 e-minis were down 10.25 points, or 0.25%, and Nasdaq 100 e-minis were down 26 points, or 0.20%.