GLOBAL shares slipped yesterday and were on track to snap a six-session streak of gains, weighed down by a sharp drop for Microsoft after its quarterly results, while oil prices jumped on US-Iran tensions.
On Wall Street, US stocks were lower in the early stages of trading, dragged lower by a drop of more than 11 per cent in Microsoft shares, putting the company on track for its biggest daily percentage drop since March 2020 with investors unnerved by record spending on artificial intelligence last quarter.
That overshadowed a gain of more than 8pc in Meta Platforms after its quarterly results and illustrated how investors are willing to forgive massive AI spending as long as it is accompanied by strong growth. Fellow “Magnificent Seven” member Tesla dipped nearly 2pc after reporting earnings while Apple is scheduled to post results after the closing bell.
“Quite a different story from their earnings last quarter and when you look at the reaction and sentiment, maybe a bit of de-risking going into the print,” said Adam Turnquist, chief technical strategist for LPL Financial in Charlotte, North Carolina.
The Dow Jones Industrial Average fell 69.72 points, or 0.15pc, to 48,945.88, the S&P 500 fell 53.52 points, or 0.77pc, to 6,924.51 and the Nasdaq Composite fell 379.35 points, or 1.59pc, to 23,478.10. MSCI’s gauge of stocks across the globe fell 5.18 points, or 0.49pc, to 1,046.49, its first decline after six sessions of gains, while the pan-European STOXX 600 index rose 0.17pc as gains in mining and energy stocks helped offset a drop in technology names.
The dollar index, which measures the greenback against a basket of currencies, rose 0.36pc to 96.51, its second straight daily advance after a recent bout of weakness, with the euro down 0.22pc at $1.1926.
The dollar was supported in part by Wednesday’s decision by the Federal Reserve to leave interest rates unchanged, with Chair Jerome Powell citing a solid economy and lowered risks to both inflation and employment, indicating the central bank could have a long runway before cutting rates again. US economic data yesterday showed weekly initial jobless claims fell, indicating layoffs remained low, although soft hiring kept consumers pessimistic about the labour market.
Oil prices surged, with US crude up 2.67pc to $64.90 a barrel and Brent rising to $70.31 per barrel, up 2.79pc on the day after climbing more than 5pc on concerns about a possible US military attack on Iran.
The geopolitical tensions helped keep upward pressure on gold, which hit a record of $5,594.82 an ounce, its ninth straight record high. Gains faded, however, and spot gold was last down 4.13% at $5,176.45 an ounce.
Big Tech earnings so far this week have sent a clear warning: investors are willing to overlook soaring spending on artificial intelligence if it fuels strong growth, but are quick to punish companies that fall short.
The contrast was clear in yesterday’s stock market reaction to earnings from Microsoft and Meta, highlighting how dramatically the stakes have changed since the launch of ChatGPT started the AI boom more than three years ago.
Shares of the Instagram parent surged 7pc on strong sales, while those of Microsoft slumped 6pc after its cloud business failed to impress.
After riding its first-mover advantage with OpenAI to become the world’s most valuable firm in 2024, Microsoft is now under growing investor pressure to justify its soaring capital outlay.
“Meta’s headline numbers are a really interesting reflection of the market’s attitude toward spending in the AI space,” said John Belton, portfolio manager at Gabelli Funds.
“All else equal, the market would typically be concerned, but they have a big revenue guide for the first quarter.”
Microsoft also faced pressure after a disclosure that OpenAI, its prized holding, accounts for 45pc of its cloud backlog. Investors are worried that some $280bn could be at risk as the unprofitable startup loses momentum in the AI race.
The ChatGPT creator had issued an internal “code-red” in December after Google’s Gemini 3 launched to positive reviews and is playing catch-up in AI coding to Anthropic’s Claude Code, which has hit an annualized run rate of more than $1bn.
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