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U.S. Stock Futures Slip Amid Inflation Concerns and Tech Sector Profit-Taking

U.S. stock index futures saw a decline during evening trading on Thursday, following a trend of mild losses earlier in the day. The market mood was influenced by inflation data surpassing expectations, creating unease among investors ahead of the Federal Reserve’s upcoming meeting.

Tech stocks, particularly those in the chipmaking sector involved in artificial intelligence, experienced significant declines due to concerns about potential long-term increases in interest rates. This led to substantial profit-taking activities, with NVIDIA Corporation (NASDAQ:NVDA) witnessing a 0.6% drop in after-hours trading.

S&P 500 Futures dipped by 0.1% to reach 5,212.75 points, while Nasdaq 100 Futures experienced a 0.2% decrease to 18,238.0 points by 19:14 ET (23:14 GMT). Meanwhile, Dow Jones Futures declined by 0.1% to 39,309.0 points.

The market’s downward trajectory was further fueled by sticky Producer Price Index (PPI) and Consumer Price Index (CPI) inflation readings, intensifying concerns about sustained high inflation levels. This data, coupled with anticipation surrounding the Fed meeting, made investors more cautious about potential hawkish signals from the central bank.

Although the Fed is not anticipated to enact further interest rate hikes, the market sentiment indicated a diminished expectation for a rate cut in June, particularly following the release of the PPI data. Consequently, some investors opted to secure profits following a period of record-high U.S. stock performance.

On Thursday, the S&P 500 closed at 5,150.48 points, marking a 0.3% decrease, while the NASDAQ Composite ended 0.3% lower at 16,128.53 points. The Dow Jones Industrial Average also experienced a 0.4% decline, closing at 38,905.66 points.

Despite the overall market downturn, energy stocks saw gains as oil prices surged to nearly five-month highs. Companies like Chevron Corp (NYSE:CVX), Exxon Mobil Corp (NYSE:XOM), and ConocoPhillips (NYSE:COP) each saw an increase of nearly 2% during Thursday’s trading session and continued to rise in aftermarket trading.

Conversely, chipmaking stocks faced significant profit-taking pressure, signaling a potential slowdown in the AI-driven rally. Apart from NVIDIA, peers such as Advanced Micro Devices Inc (NASDAQ:AMD) and chip designer Arm Holdings (NASDAQ:ARM) experienced declines of 0.4% and 0.2%, respectively, in aftermarket trading.

In terms of notable post-market movements, Adobe Systems Incorporated (NASDAQ:ADBE) witnessed an 11% decrease after issuing a second-quarter revenue guidance that fell below expectations, attributed to heightened competition and weak demand for its AI offerings. On a positive note, electric vehicle manufacturer Rivian Automotive Inc (NASDAQ:RIVN) rebounded with a 2.9% increase following an 8.7% dip earlier in the session, driven by Piper Sandler’s upgrade of the stock to “overweight” based on optimism surrounding its R2 SUV and more efficient capital spending plans.

Foxconn Surges on Strong Q4 Earnings and Bullish AI Demand Outlook

Foxconn, formerly known as Hon Hai Precision Industry Co (TW:2317), saw a surge in its shares on Friday following robust fourth-quarter earnings and optimistic projections fueled by increased demand from the artificial intelligence sector.

Shares of Foxconn in Taiwan soared by as much as 9% to reach a level not seen in over five years, hitting T$132, significantly outperforming the modest 0.4% decline in the Taiwan Weighted index.

Despite a 6% drop in revenue attributed to declining smartphone part sales, Foxconn reported a remarkable 33% increase in net profit for the fourth quarter.

During a post-earnings call, Chairman Young Liu expressed confidence in heightened demand for AI servers from clients, forecasting a revenue growth of over 30% in 2024 for this segment.

While Foxconn’s direct exposure to the AI industry is limited, the anticipated surge in server and computing needs from the AI sector is expected to drive demand for the company’s network products.

In addition to increased sales of cloud devices, networking products, and consumer electronics beyond smartphones, Foxconn’s biggest customer, Apple Inc (NASDAQ:AAPL), also surpassed quarterly estimates for its fourth-quarter earnings.

However, concerns lingered over Apple’s slowing sales in China.

Foxconn cautioned that first-quarter revenue is likely to decline compared to the previous year, citing the significant boost in Q1 2023 revenue due to a rebound in Chinese sales following the country’s emergence from three years of COVID-related lockdowns.

Looking ahead, Foxconn anticipates maintaining steady capital expenditure as it explores expansion opportunities into new sectors, including automobiles and potentially semiconductors.

Investing on a Friday is like making plans for the weekend – you’re excited about the potential payoff, but also mindful of the risks involved. It’s a bit like trying to predict whether your favorite brunch spot will have a line out the door or a table waiting just for you. So, whether you’re putting your money in stocks or deciding between pancakes or waffles, remember to approach both with a mix of optimism and caution. After all, just like a well-made investment, a perfectly chosen brunch option can leave you feeling satisfied and ready to tackle whatever the future holds.