Landon Capital

Wall Street Woes: Futures Fall as Rate Fears, Trump Verdict, and Weak Earnings Shake Investors

In a scene straight out of Wall Street’s thriller, U.S. stock index futures took a nosedive in Thursday’s twilight hours, dragging out a losing streak sparked by dread over high interest rates and sluggish growth. Investors, already jittery over the prospect of more inflation clues from the upcoming PCE data, now had an extra dose of drama with a New York court finding former President Trump guilty in a hush money scandal, with sentencing set for July 11.

Wall Street’s recent two-day plunge was fueled by a cocktail of disappointing earnings and profit-taking, not to mention rising skepticism about the AI industry’s prospects weighing on tech giants. Adding to the tension, the Federal Reserve’s hints that sticky inflation would keep interest rate cuts off the table this year didn’t help soothe frayed nerves.

By 19:52 ET (23:52 GMT), S&P 500 Futures dipped 0.2% to 5,242.75 points, Nasdaq 100 Futures dropped 0.3% to 18,59.25 points, and Dow Jones Futures slid 0.2% to 38,174.0 points. All eyes were now on Friday’s PCE price index data, the Fed’s favorite inflation gauge, which was expected to show a slight easing in April but still well above the Fed’s 2% target, leaving little room for rate cuts.

Amid the turmoil, month-end selling and a lackluster finish to the first-quarter earnings season added pressure, compounded by GDP data revealing slower-than-expected economic growth and fueling stagflation fears. On Thursday, the S&P 500 fell 0.6% to 5,235.48 points, the NASDAQ Composite dropped 1.1% to 16,737.08 points, and the Dow Jones Industrial Average declined 0.9% to 38,111.48 points.

In the after-hours trading spotlight, Dell Technologies tumbled nearly 18% after underwhelming first-quarter earnings barely benefited from AI demand, while Nordstrom slid 7% on weak profits. On the flip side, GPS soared 20% on surprising earnings and an upbeat forecast, and Zscaler jumped 13% following robust earnings and a boosted outlook. The stock market soap opera continues, leaving investors clinging to the edge of their seats.

Dell Shares Plunge 17% as AI Server Costs Bite into Margins Despite Revenue Surge

Dell’s forecast for the current-quarter profit didn’t quite hit the sweet spot on Thursday, warning that the hefty costs of building AI-ready servers would chew into annual margins. This revelation sent its shares tumbling over 17% in after-hours trading.

The Round Rock, Texas-based tech giant is bracing for its adjusted gross margin rate to slip by about 150 basis points in fiscal 2025. For the current quarter, Dell predicts an adjusted profit per share of $1.65, give or take 10 cents, falling short of analysts’ average estimate of $1.84, according to LSEG data.

Demand for high-performance computing and massive data centers, driven by the generative AI boom, has sparked a rush for AI-capable servers, with Dell among the key players. However, Mikako Kitagawa, director analyst at Gartner, noted that “the margin decline mirrors the fierce pricing battles as the market hasn’t fully rebounded, and competitors are scrambling for a slice of the pie.”

Despite the setback, shipments of Dell’s AI-optimized servers surged, more than doubling to $1.7 billion, with backlog swelling over 30% to $3.8 billion, according to COO Jeff Clarke.

In a bid to stay ahead, Dell recently launched a slew of AI-powered PCs with Qualcomm processors and announced a new server featuring Nvidia’s latest chips, set to hit the market in the latter half of 2024.

Remarkably, Dell’s stock has more than doubled this year, hitting an all-time high earlier this week. For the second quarter, Dell expects revenue between $23.5 billion and $24.5 billion, topping the average estimate of $23.21 billion.

The company also boosted its fiscal 2025 revenue forecast to between $93.5 billion and $97.5 billion, up from a previous range of $91 billion to $95 billion. First-quarter revenue, ending May 3, rose 6% to $22.24 billion, ending a six-quarter losing streak, with adjusted profit aligning closely with analysts’ predictions.

Revenue for Dell’s infrastructure solutions group—covering storage, software, and servers—jumped 22% to $9.23 billion, while its client solutions group, home to PCs, remained flat.

Investing on a Friday is like making a grand entrance to a party just as the DJ starts playing your favorite song. You’re fashionably late, but with a flair for dramatic timing. The stock market, after a week of unpredictable hustle and bustle, is winding down, yet here you are, ready to dive in when everyone else is already contemplating their weekend plans. It’s a bold move, a bit like sneaking in one last dance before the lights come on. Will your savvy decisions carry the rhythm into Monday’s opening bell, or will they fizzle out like yesterday’s champagne? Only time, and perhaps a touch of luck, will tell.