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Happy Tuesday. Stock futures were mixed as investors reacted to Apple’s (AAPL) earnings report while Americans geared up for today’s midterm elections.
Apple shares were down 3.86% in premarket trading after the tech giant issued a disappointing margin forecast and reported weaker-than-expected fourth-quarter iPad sales.
Big data analytics company Palantir (PLTR) dropped 8.42% despite beating third-quarter earnings expectations and raising its full-year guidance, as investors focused on a sharp deceleration in new contract bookings and concerns about its lofty valuation.
Markets closed mixed on Monday, as an early morning tech rebound faded into a late-day sell-off, while the Dow Jones Industrial Average rose on a sharp drop in oil prices.
“Investors are increasingly questioning whether the enormous sums being spent on data centers and AI infrastructure can generate sufficient returns, with attention shifting towards profitability, free cash flow and monetization,” said Daniela Hathorn, senior market analyst at Capital.com. “Elevated Treasury yields are adding to the pressure by making future earnings less valuable in today’s terms.”
“The combination of stretched valuations, persistent borrowing costs and uncertainty around AI returns is proving difficult for technology stocks to overcome.”
Hathorn said today’s US midterm elections introduce another source of uncertainty, particularly for the dollar, Treasury yields and sectors sensitive to fiscal and regulatory policy.
“Investors will be watching whether the results change expectations for government spending, borrowing and the administration’s ability to advance its economic agenda,” she said. “However, the immediate challenge for equities remains the combination of elevated yields and growing doubts about AI monetization.”
A diplomatic breakthrough in the Middle East could provide further relief through lower energy prices and inflation expectations, Hathorn added, “but it’s unlikely to be enough to restore confidence in technology stocks unless earnings expectations and valuations begin to stabilize.”