Investing.com -- Tech stocks look set to drop sharply at the U.S. open Wednesday, after ASML's disappointing guidance and worries about Taiwan. Amazon looks set o benefit from its Prime Day, while U.K inflation shows underlying strength.
1. Futures slip as tech stocks slump
U.S. stock futures fell Wednesday, retreating from record levels with the tech sector taking the brunt of the selling after a downbeat forecast from Dutch semiconductor firm ASML (AS:ASML).
By 04:30 ET (08:30 GMT), the Dow futures contract was 70 points, or 0.2%, lower, S&P 500 futures dropped 45 points, or 0.8%, and Nasdaq 100 futures fell by 270 points, or 1.3%.
The main indices closed higher on Monday, with the blue chip Dow Jones Industrial Average rallying more than 700 points and closing at a record, while also posting its best session since June 2023.
However, sentiment has turned negative after ASML's (AS:ASML) third-quarter sales forecast fell short of estimates despite a strong second quarter, with sales reaching the high end of guidance.
There are more earnings to digest Wednesday, including from United Airlines (NASDAQ:UAL), Johnson & Johnson (NYSE:JNJ) and U.S. Bancorp (NYSE:USB).
On the economic front, the Fed’s Beige Book will also be released, as will housing starts and building permits data for June.
2. TSMC weakens after Trump’s comments
Donald Trump, the Republican candidate for the U.S. presidency, has stepped into the thorny topic of U.S.-China diplomatic relations, saying Taiwan should pay the U.S. for supplying defense equipment as it does not give the country anything.
“I know the people very well, respect them greatly. They did take about 100% of our chip business. I think, Taiwan should pay us for defense,” Trump said in an interview with Bloomberg Businessweek published late Tuesday, adding that he felt the U.S. was no different than an insurance company.
The freedom of Taiwan is a key point of contention between the U.S. and China, and the U.S. is Taiwan’s biggest supplier of defense equipment, despite having no formal agreement with the island.
This resulted in Taiwan Semiconductor Manufacturing's (NYSE:TSM) stock falling sharply, with the world’s biggest contract chipmaker by far Taiwan’s most valuable company as well as a main point of focus for China.
Taiwan is a key part of the global supply chain for technology, with a bulk of the world’s semiconductors being manufactured in the country.
TSMC will report earnings on Thursday, and is forecast to see a strong quarterly profit on sustained demand from AI. Monthly data showed the company benefited from much higher-than-expected revenue in the second quarter.
3. Amazon’s Prime Day set for strong sales growth
Amazon's (NASDAQ:AMZN) annual Prime Day two-day shopping event concludes later Wednesday, and spending by the online retail giant’s customers could rise 10.5% from last year, according to forecasts from Adobe (NASDAQ:ADBE) Analytics, a firm that studies e-commerce transaction data.
Shoppers are likely to spend roughly $14 billion over Tuesday and Wednesday, Adobe said, with Amazon turning July, a traditionally slow time for retailers, into an important component of its annual results, accounting for 1% to 2% of its net global sales, according to CFRA Research.
Amazon said that Day 1 of its two-day Prime Day 2023 earned its biggest sales day ever, although it doesn't disclose total sales for Prime Day.
Adobe calculated that shoppers spent $12.7 billion at Amazon last year during Prime Day, which was 6.1% more than what they spent during the 2022 event.
4. UK rate cutting on hold?
Doubts are growing over whether the Bank of England will start cutting U.K. interest rates at its next meeting in August, after British inflation held steady last month, defying forecasts for a slight fall.
Consumer prices rose 0.1% on the month in June, an annual rise of 2.0%, unchanged from the previous month, defying expectations of a drop to 1.9%.
Importantly, core CPI, which excludes volatile food and energy factors, held steady at 3.5% on an annual basis, suggesting underlying price pressures remained strong.
The Bank of England meets at the start of next month, and rate futures now showed investors saw a roughly one in three chance of a rate cut then, down from almost 50-50 before the inflation data.
“We know that services inflation is what the Bank of England is mostly focused on at this stage, and the stabilization at 5.7% YoY in June does not endorse any additional easing bets ahead of the 1st August meeting,” said analysts at ING, in a note.
5. Crude climbs on US inventories draw
Crude prices edged higher Wednesday, as signs of tighter U.S. supplies helped soothe some fears over weakening demand in the rest of the globe, and China in particular.
By 04:30 ET, the U.S. crude futures (WTI) climbed 0.4% to $80.04 a barrel, while the Brent contract rose 0.4% to $84.03 a barrel.
U.S. crude oil inventories fell by 4.4 million barrels last week, according to data from the American Petroleum Institute, considerably more than expected, pointing to a tight market in the world's largest oil producer and consumer.
The U.S. Energy Information Administration will release its official storage report later in the session.
Crude markets suffered a sharp tumble over the past week as weak economic data from top oil importer China ramped up concerns over slowing demand.