US stock index futures moved in different directions as investors waited for the results of the US midterm elections. Rising crude oil prices and concerns about technology stocks also affected market sentiment.
Apple shares dropped 4.5% in premarket trading after the company warned that rising memory chip costs could put pressure on its profit margins during the holiday quarter. The warning came even as Apple reported results that beat Wall Street expectations, helped by strong iPhone sales, according to Reuters.
Palantir Technologies, an AI-powered analytics software company, forecast fourth-quarter revenue above market expectations after reporting better-than-expected third-quarter results. However, its shares fell 6.3%.
The Nasdaq-100 closed more than 10% below its record closing high on Monday. This confirmed that the technology-heavy index had entered a market correction as investors became worried about the huge amounts Big Tech companies are spending on artificial intelligence (AI).
Investors are concerned that major technology companies are spending heavily on AI but have not yet shown enough returns from these investments. This has increased doubts about whether the spending will generate enough profits, according to Reuters.
Several technology companies have recently raised money through bond markets to fund their AI projects. Investors are worried that these debt-funded investments could become more difficult to justify as borrowing costs rise.
At 5:06 a.m. ET, Dow E-minis fell 219 points, or 0.42%. S&P 500 E-minis edged up 1.5 points, or 0.02%, while Nasdaq-100 E-minis gained 130.5 points, or 0.46%.
Most major chip stocks moved higher, helping offset some of the losses in technology shares. Nvidia gained 1.6% after falling for four straight sessions.
Apple overtook Nvidia to become the world’s most valuable company last week after Nvidia suffered heavy losses in recent trading sessions.
Advanced Micro Devices (AMD) gained 2.8% before its quarterly results were due after the market closed. Marvell Technology and Intel shares also moved higher, according to Reuters.
US midterm election results in focus
American voters are voting in the November 3 midterm elections to decide the balance of power in Congress. The results will also serve as a test of public opinion on the first two years of President Donald Trump’s second term.
Opinion polls and nonpartisan analysts suggest that Democrats are likely to take control of the House of Representatives from Republicans. However, control of the Senate remains uncertain.
Societe Generale analysts said concerns about government spending and rising budget deficits have continued to grow. These concerns have contributed to market volatility, according to a note from the analysts cited by Reuters.
Societe Generale analysts said that any major increase in government spending would require lengthy negotiations. If Democrats take control of the House, disagreements between the two parties could make it harder to pass new laws and spending plans.
Morgan Stanley analysts said the midterm elections could remove a major source of uncertainty for the stock market. They also believe the market correction that began in June is in its final stages, according to a note published earlier this week and cited by Reuters.
Iran tensions and rising oil prices
Investors are also watching the possibility of the United States launching fresh attacks on Iran after the midterm elections. Trump had hinted at this possibility in recent weeks. When reporters asked Trump on Monday whether he was considering another strike on Iran after the midterms, he replied, “no”, according to Reuters.
J.P. Morgan analysts said they view any fall in stock prices caused by geopolitical tensions as a possible buying opportunity, according to a note published earlier this week and cited by Reuters.
Oil prices moved higher on Tuesday after declining in the previous trading session. The rise came amid fresh concerns about the conflict between the United States and Iran.
An Iranian official said an agreement to end the war was not close. At the same time, the United States struck Iran’s Qeshm Island, adding to concerns about the conflict, according to Reuters.
Other company stocks and earnings
The US corporate earnings season remained busy, with several major companies scheduled to release their quarterly results before the market opened on Tuesday.
Drugmaker Pfizer, agribusiness company Archer-Daniels-Midland and oil refiner Marathon Petroleum were among the companies scheduled to announce their earnings before the opening bell, according to Reuters.
Shares of semiconductor testing equipment maker Aehr Test Systems gained 14.6% after the company raised its full-year revenue forecast. Broadband solutions provider Harmonic rose 16.1% after increasing its revenue forecast for the full financial year.