Chip stocks boost Nasdaq futures before Fed verdict; Microsoft lags
July ADP jobs data due at 8:15 a.m. ET
Fed expected to stay pat on interest rates at 2:00 p.m. ET
Starbucks up as efficiency gains bolster qtrly profit
T-Mobile climbs after raising FY subscriber additions forecast
Futures up: Dow 0.08%, S&P 500 0.95%, Nasdaq 1.56%
Updated at 0715 a.m. ET/1115 GMT
By Ankika Biswas and Johann M Cherian
July 31 (Reuters) - Futures tied to the Nasdaq index rose on Wednesday after a bullish forecast from Advanced Micro Devices drove chip stocks higher even as Microsoft faltered, while investors geared up for the Federal Reserve's rate decision.
AMD AMD.O soared 8.3% in premarket trading after lifting its2024 forecast for AI chipsales. Nvidia NVDA.O rose 6.5%, Intel INTC.O 2.3% andBroadcom AVGO.O 6.4%.
"(AMD) is along way from stealing Nvidia's crown as the king of artificial intelligence, but it is making a dent with demand for AI processors helping sales to data centres more than double," said Derren Nathan, head of equity research at Hargreaves Lansdown.
At 7:15 a.m. ET, Dow e-minis 1YMcv1 were up 31 points, or 0.08%, S&P 500 e-minis EScv1 were up 52 points, or 0.95%, and Nasdaq 100 e-minis NQcv1 were up 295.5 points, or 1.56%.
Megacap tech and chip stocks have taken a hit this month, after steering the U.S. equity market to record highs in 2024, on euphoria around AI adoption and the prospect of early rate cuts from the U.S. Federal Reserve. Investors, who now see value in underperforming sectors, have started rotating away from megacaps.
The Philadelphia SE Semiconductor index .SOX is set to log its first monthly decline in three and its worst month since September 2022.
The Nasdaq and the S&P 500 - market-cap weighted indexes which are heavily inclined towards expensive tech stocks - are also set for their weakest month in three, while the price-weighted Dow is on track for its best monthly performance since last December.
Microsoft MSFT.O lost 2.9% as it plans to spend more this fiscal year to build its AI infrastructure, even as growth in its cloud business slowed - another sign that the payoff from hefty investments in the technology might take longer than hoped.
Megacaps such asAlphabet GOOGL.O, Meta Platforms META.O and Tesla TSLA.O were up between 0.2% and 0.7%.
Meta will report earnings after markets close, while results for Apple and Amazon are due on Thursday.
Quarterly results from tech giants Tesla, Microsoft and Alphabet have so far disappointed investors, who are questioning if the AI-led rally has run out of steam.
Investors are now focusing on the centerpiece event of the week - the Fed'sdecision and commentary on interest rates. The central bankis expected to hold rates steady and open the door for a September rate cut.
With traders fully pricing in a cut by September, according to CME's FedWatch, they fear that any disappointment on this front could amplify the recent equity selloff.
The S&P 500 and the Nasdaqfell on Tuesday, weighed by chip and megacap shares, while the Dow outperformed in a fading sector rotation.
The ADPNational Employment reading for July, due at 8:15 a.m. ET, isalso on investors' watch list after Tuesday'sU.S. job openings data pointed to continued labor resilience underpinning the economy.
Among others, T-Mobile TMUS.Oraised its full-year forecast for monthly bill-paying phone subscriber additions, sending the carrier's shares up3.2%.
Starbucks SBUX.O rose 3.4% after its store operation improvements helped meet quarterly profit expectations.
Pinterest PINS.N slumped 10.6% after forecasting current-quarter revenue below expectations, while Match Group MTCH.O jumped 10% after a second-quarter revenue beat and plans to lay off about 6% of its staff.
Reporting by Ankika Biswas and Johann M Cherian in Bengaluru; Editing by Pooja Desai and Saumyadeb Chakrabarty
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