Investing.com -- Amazon warns of a slowdown at its crucial cloud-computing division, while U.S. stock futures edge down after a fresh batch of other corporate results. Focus will turn to the Federal Reserve's preferred inflation gauge later today, but in the meantime traders are digesting major economic data out of Europe.
1. U.S. stock futures slip amid earnings deluge
U.S. stocks pointed lower on Friday as investors weighed a series of corporate earnings, including results from technology giant Amazon.
By 05:23 ET (09:23 GMT), the Dow futures contract was down 168 points of 0.50%, S&P 500 futures traded 20 points or 0.49% lower, and Nasdaq 100 futures fell 51 points or 0.39%.
Shares in Amazon (NASDAQ:AMZN) dropped more than 2% in after hours trading, reversing earlier gains. Meanwhile, chipmaker Intel (NASDAQ:INTC) predicted that its margins would improve in the second half of 2023, giving a boost to shares postmarket.
Elsewhere, quarterly revenues at Snap (NYSE:SNAP) - the company behind photo-messaging app Snapchat - missed estimates following alterations to its advertising platform, sending shares into the red in extended trading. Image-sharing social media site Pinterest (NYSE:PINS) also saw its shares shed more than a tenth of their value after a slump in ad spending led to smaller-than-anticipated revenue growth in its second quarter.
Gaming and media conglomerate Sony (NYSE:SONY) reported on Friday that it expects profits to decline from a record high in its current fiscal period because of weakness at its financial services business.
Later today, oil majors Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) will be among the biggest names rounding out a busy week of corporate earnings.
2. Cloudy outlook for AWS
Amazon initially saw its stock rally following the release of its first quarter returns, which showed that revenue at its key cloud-computing unit Amazon Web Services - a major driver of the group's overall profit - had grown by more than expected to $21.4 billion. Overall group net sales of $127.36 billion also beat estimates.
But the gains reversed after Chief Financial Officer Brian Olsavsky warned in a call with analysts that customers using AWS were reining spending due to "tough economic conditions." As a result, sales growth rates in April were "about 500 basis points lower than what we saw in [the first quarter]," Olsavsky added.
Analysts at Morgan Stanley noted that near-term growth prospects at AWS now look uncertain, although they remained positive about its prospects over a longer period of time.
Amazon's results came after reports from other U.S. tech giants this week, including Google-parent Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), and Facebook-owner Meta Platforms (NASDAQ:META). These firms have been slashing expenses, particularly through sweeping job cuts, in a bid to offset flagging spending by customers wary of the broader economic outlook.
3. Key Fed inflation gauge looms
A measure of inflation that is closely watched by the Federal Reserve is due out later today, with investors keen to find out just how much the U.S. central bank's recently aggressive monetary policy is impacting price growth.
The personal consumption expenditure index excluding volatile items like food and energy is predicted to have increased by 0.3% in March, in line with the prior month. On a year-on-year basis, the reading is forecast to slow to 4.5% from 4.6% in February.
The Fed has raised interest rates at an unprecedented clip over the past year in a bid to corral runaway inflation.
But the uptick in borrowing costs is starting to show signs that it is hitting overall growth. U.S. economic activity decelerated by more-than-anticipated to 1.1% in the first quarter, according to Commerce Department data released on Thursday, due in large part to rising rates and high inflation.
4. Eurozone growth slows
Economic growth in the Eurozone grew by less than projected in the first quarter, as stubbornly elevated prices and spiking interest rates weighed on overall activity.
Seasonally-adjusted gross domestic product in the currency area rose by 0.1% in the first three months of 2023, accelerating from stagnation in the fourth quarter but below economists' estimates for an uptick of 0.2%. On a year-on-year basis, GDP slowed by more than anticipated to 1.3% in the January to March period, down from the prior level of 1.8%.
Germany - the Eurozone's largest economy - did not grow despite hopes for a marginal expansion, although this was partly offset by a jump in output in France, Italy, and Spain.
Investors are watching today's data out of the region closely ahead of the European Central Bank's latest policy-setting meeting next week. The ECB is largely expected to raise rates in early May, although the size of that increase is still up for debate, along with any future hikes.
5. Oil prices choppy
Oil prices edged lower, erasing earlier gains, as traders digested data showing stagnating economic activity in Germany that added to disappointing U.S. growth in the first quarter.
By 04:45 EST, U.S. crude futures traded 0.87% lower at $74.11 a barrel, while the Brent contract dipped by 0.70% to $77.67.
Both benchmarks are on course to register declines of over 3% this week, bringing their drops to close to 10% over the past two weeks, as concerns over how a possible global slowdown, particularly in the U.S., the world's biggest importer of oil, could impact crude demand.