Weak Start on the US Stock Markets: Mega-cap Techs Weigh Down Markets

The US stock markets started the trading day with clear weakness as the futures for the main US indices were weighed down by significant losses in the technology sector. Investors need to process the latest quarterly figures from the so-called 'Magnificent 7' and are also eagerly anticipating a key inflation metric that will set the tone for the trading day in pre-market trading. Yesterday, the S&P 500 closed down 19 points, reducing the October gain to less than 1%. The main reasons for the losses were declining prices in major technology stocks and rising yields on government bonds, which increased significantly due to robust labor market data and strong economic growth in the third quarter. The latest quarterly results from Meta Platforms and Microsoft particularly focus on the enormous costs of AI expansion, which significantly weigh on the profit margins of large technology companies. Amazon and Apple will present their quarterly results after the market closes, with Amazon also likely to outline investment development plans and Apple providing details on the demand for the new iPhone 16. Meanwhile, the yields on benchmark ten-year bonds remain at their highest level since early July, last quoted at 4.288%. This is a reaction to yesterday's ADP employment data and today's PCE inflation reporting. The emerging inflation concerns are partly due to the continued flourishing economy, as well as expected increased expenditures by the future US president after the elections. The US Dollar Index, a measure of the dollar's strength against a basket of six major international currencies, rose by 0.05% to 104.040, heading towards the best monthly gain in two years. Pre-market indications showed that significant declines in Meta and Microsoft would burden the Nasdaq by around 210 points, while the Dow Jones Industrial Average was expected to drop by 225 points. The S&P 500, closing the month with a gain of 0.89%, is poised for an opening loss of 45 points. International markets also experienced losses, with the Stoxx 600 in Europe down 0.71% and the British FTSE 100 falling 0.76% following the announcement of a large government spending package and the highest tax increases since 1993.