Futures Rise Despite Software, AMD Rout Ahead Of Google Earnings
US stock futures are up small with Tech lagging on rotation fears, though major indices are off their overnight lows. The AI narrative has been flipped upside down, with traders focused on perceived losers, most of which are in the Software sector, where “there’s no floor” according to one investment manager. As of 8:00am ET, S&P futures are up 0.2%, well off session lows; Nasdaq futures rise 0.2%, pressured by weakness in AMD which tumbled 8% after projections which disappointed Wall Street; Alphabet is set to report after the close. Pre-market, Mag7 are mixed with AAPL, AMZN, and GOOG higher with Semis under pressure (AMD -7%, AVGO -0.8%, NVDA -0.1%). Both Cyclicals and Defensives are mixed without a clear leader. The USD is bid as bond yields are higher by 1-2bps.Commodities are stronger led by Energy and Metals, with gold blasting off back over $5k, and silver rising above $90. Today’s macro data focus is on ISM Services where an in line / stronger print may create a renewed bid for stocks.
In premarket trading, Mag 7 stocks are mostly higher: Alphabet +1% ahead of earnings due after the market close (Microsoft +0.1%, Amazon +0.3%, Apple +0.3%, Nvidia +0.3%, Meta little changed, Tesla -0.06%)
- AMD (AMD) slides 9% after the chipmaker’s sales forecast underwhelmed investors, a sign that it’s not making the AI inroads that some on Wall Street anticipated.
- Boston Scientific (BSX) falls 9% after the maker of medical devices gave a profit and sales growth forecast for 2026 that fell short of Wall Street’s expectations.
- Chipotle (CMG) falls 5% after the restaurant chain operator’s underwhelming annual comparable sales forecast.
- Eli Lilly & Co. (LLY) rises 7% after providing an upbeat sales forecast for the year as strong demand for its weight loss drug cemented its position at the top of the obesity market.
- Emerson Electric (EMR) rises 4% after the automation technology provider reported 9% growth in underlying orders in its first quarter. Citi said orders and other results show a “largely healthy demand environment.”
- Johnson Controls (JCI) rises 8% after the HVAC company boosted its adjusted earnings per share forecast for the full year to a figure above what analysts expected.
- Lumen Technologies (LUMN) falls 4% after the wireline telecommunications company’s results and outlook prompted a downgrade from Raymond James.
- Lumentum (LITE) rises 10% after the maker of optical and photonic products posted stronger-than-expected second-quarter results and gave a robust forecast.
- Match Group (MTCH) jumps 7% after the dating service provider reported revenue for the fourth quarter that beat the average analyst estimate.
- Silicon Laboratories (SLAB) jumps 53% after agreeing to be acquired by Texas Instruments for $231 per share in cash.
- Sonos (SONO) rises 12% after the speaker company’s first-quarter results beat expectations on key metrics.
- Take-Two Interactive (TTWO) rises 5% after the video game publisher raised its fourth-quarter bookings forecast. Analysts are positive about the company reiterating the launch date of its highly anticipated Grand Theft Auto VI.
- Uber Technologies Inc. (UBER) falls 6% after giving a weak profit outlook and promoted an outspoken driverless-vehicle bull to be its new chief financial officer, signaling further investment in a closely watched area of the ride-hailing company’s business.
Economically sensitive shares were Wednesday’s biggest gainers, with futures for the Russell 2000 index of small caps advancing 0.4%, while tech treaded water after a historic rout for SaaS/Software names. The rotation into cyclical stocks persisted as renewed fears over AI-driven disruption weighed on markets. Tuesday’s selloff was sparked by a new automation tool from Anthropic PBC, with losses spilling into financial services and asset managers. Caution lingered on Wednesday, with a European basket of stocks seen at risk from AI disruption falling another 1.1%.
“I don’t think the market has fully resolved whether this move was based on fear or fundamentals. What’s clear is that we’ve had a confidence break, really, at the category level,” said Stephanie Niven, portfolio manager at Ninety One. “Before convictions can be rebuilt at that really important company level, we are seeing this kind of indiscriminate selling.”
Disruption fears have added a new layer of complexity in distinguishing winners from losers in AI. With valuations stretched and earnings season under way, investors have already punished companies that failed to live up to elevated expectations. The mood among investors about software stocks and other sectors deemed at risk of AI advances is grim, according to JPMorgan Chase & Co. analyst Toby Ogg. Ogg met more than 50 investors across Europe and the US over two weeks and said he found that they had significantly reduced software holdings over the past 12 to 18 months. Even after the latest pullback, “the general appetite to step in remains generally low,” he said in a client note.
No one is interested in buying the dip, according to JPMorgan analyst Toby Ogg, and even good earnings won’t be enough, since AI disruption is a long-term issue. “We are now in an environment where the sector isn’t just guilty until proven innocent but is now being sentenced before trial,” he said.
“There’s clearly indiscriminate selling across the entire software cluster,” said Karen Kharmandarian, senior equity investment manager at Mirova in Paris. “There’s no floor, the downward momentum is too strong. It looks a bit like capitulation, which could offer opportunities selectively once things stabilize”.
The pain isn’t just in equities, with banks unable to sell a software loan deal. In options, the implied volatility of software stocks is blowing out versus the S&P 500 ETF.
Another test looms for the AI trade when Alphabet reports after the close. The stock has been the top performer among the Magnificent Seven megacaps since the beginning of 2025. Peers Microsoft Corp. and Meta Platforms Inc. saw divergent reactions to their results last week, reflecting views over whether heavy AI spending is paying off.
“The biggest risk regarding tonight’s publication is the fact that there is a decoupling between Google’s long-term stature as an AI winner, thanks to its vertically integrated approach, and short terms trends in search and monetization, which might prove more erratic,” said Jacques-Aurélien Marcireau, co-head of equities at Edmond de Rothschild Asset Management.
European stocks reverse an earlier decline as an initial extension of the Anthropic-sparked software selloff eases. Stoxx 600 now up by 0.3% as gains in telecoms and chemicals offset mixed results from the financials sector and a large drop for drugmaker Novo Nordisk, which sank 16% after a disappointing sales outlook. Here are some of the biggest movers on Wednesday:
- Handelsbanken gains as much as 4.4% after posting a top-line beat in its full-year report.
- DNB Bank shares rise as much as 3.5% after the Norwegian bank reported net profit ahead of expectations, driven by beats in net interest income and fees.
- Mediobanca shares rise as much as 7.8% after MF daily reported that the board of the Banca Monte Paschi di Siena is begining to tilt toward a delisting of the taken over bank.
- Wendel shares rise as much as 7% after Germany’s Henkel agreed to buy Stahl Parent from Stahl Group, which is majority-owned by the French investment firm. BASF and Clariant also have stakes.
- AMS Osram shares rise as much as 13% after agreeing to offload its sensor business to Infineon for €570m in cash.
- Novo Nordisk shares plunge as much as 20% in Copenhagen after the drugmaker forecast a steep decline in sales this year that was also wider than analyst expectations.
- Software, IT, data services, ad agencies and exchanges are among the equity sectors leading losses in the European session on Wednesday, as they extend a selloff following persistent investor concerns over potential disruption from AI tools.
- UBS shares dropped as much as 5.5% despite a beat on 4Q earnings as it announced a below-expected $3 billion buyback program for 2026 that could increase during the year and maintained its financial targets for 2028.
- Santander shares drop as much as 5% after the Spanish lender announced the acquisition of Webster Financial in a $12 billion deal.
- Watches of Switzerland tumbles as much as 5.1% after the watch retailer cut the midpoint of its margin goal, countering the improved outlook for sales growth.
- DSV falls as much as 4.5% after the Danish shipping and logistics group guidance for 2026 disappointed, overshadowing decent 4Q figures.
- Novartis shares drop as much as 3.1% after the Swiss drugmaker reported net sales for the fourth quarter that missed expectations, while its 2026 Ebit forecast was also below estimates.
- Atalaya Mining Copper shares fall as much as 8.9% to 937 pence, slipping below the offering price after holder Trafigura Group sold 14 million shares at 945 pence per share.
Earlier in the session, Asian stocks slipped in another session dominated by technology concerns, after a broad selloff in the US on fears of disruption from artificial intelligence. The MSCI Asia Pacific Index fell as much as 0.6%, with software makers among the biggest decliners after Anthropic’s launch of a new automation tool. Hong Kong led losses and Japan’s Nikkei 225 also dropped, while stocks rose in South Korea, Australia and Thailand.
Eli Lilly, Uber and Yum! Brands are among companies expected to report before the market open. Lilly investors will be looking for guidance on how the company sees the obesity market expanding following a deal with the Trump administration to widen access for some patients with Medicare. Rival Novo Nordisk’s guidance fell well short.
In FX, the dollar is stronger and the yen extended losses for a 4th session as traders anticipated a victory for Prime Minister Sanae Takaichi’s Liberal Democratic Party in this weekend’s poll.
In rates,treasuries are slightly cheaper across the curve, with yields around 1bp higher vs Tuesday’s close and lagging European bonds, which are higher after euro-area January inflation data and services PMIs. US session includes ISM services gauge, following Treasury quarterly refunding announcement at 8:30am. US 10-year yield near 4.28% is more than 1bp cheaper on the day while German counterpart is richer by about 2bp; UK 10-year is higher by less than 1bp European bonds rising and outperforming gilts and Treasuries. Euro-zone inflation cooled to the lowest level in more than a year.
In commodities, gold moves back above $5,000/oz and silver up to around $89/oz. Oil prices up, Brent above $67/barrel. Bitcoin hovered near $76,000.
The dollar and Treasuries were little changed.
US economic calendar includes January ADP employment change (8:30am), January final S&P Global US services PMI (9:45am) and January ISM services index (10am).Fed speaker slate includes Governor Cook on monetary policy and the economic outlook at the Economic Club of Miami (6:30pm)
Market Snapshot
- S&P 500 mini little changed
- Nasdaq 100 mini little changed
- Russell 2000 mini +0.3%
- Stoxx Europe 600 little changed
- DAX -0.1%, CAC 40 +0.7%
- 10-year Treasury yield +1 basis point at 4.28%
- VIX -0.1 points at 17.94
- Bloomberg Dollar Index +0.2% at 1189.69
- euro little changed at $1.1814
- WTI crude +0.7% at $63.66/barrel
Top Overnight News
- Donald Trump reiterated that the US and Iran are maintaining diplomatic talks, even after an American warplane shot down an Iranian drone in the Arabian Sea. BBG
- Trump’s Federal Reserve chair nominee Kevin Warsh faces a battle in the Senate after lawmakers threatened to hold up his confirmation until the DoJ halts its probes into Jay Powell and Lisa Cook. FT
- Nvidia is nearing a deal to invest $20 billion in OpenAI as part of its latest funding round, people familiar said. BBG
- Prime Minister Sanae Takaichi should not count on the Bank of Japan's help in taming sharp bond yield rises given the huge cost of intervention, including the significant risk of igniting unwelcome yen falls, sources say. RTRS
- Hedge funds are using leverage to reap 28% returns from the safest of bonds. A key ingredient is their use of borrowed cash to juice returns, in some cases amplifying positions up to 15 times their initial investment. BBG
- Investors are ramping up bets on higher long dated Treasury yields and a steeper yield curve as incoming Federal Reserve Chair Kevin Warsh is expected to press for interest rate cuts while shrinking the U.S. central bank's balance sheet. Warsh's preference for a materially smaller Fed balance sheet, currently around $6.59 trillion, implies a withdrawal of meaningful government demand for Treasuries, a move which tightens financial conditions because the central bank is not providing liquidity to the market. RTRS
- Euro-area inflation slowed to 1.7% in January, the weakest reading in more than a year and further below the ECB’s 2% target. BBG
- Novo shares plunged after the drugmaker forecast sales decline of up to 13% in 2026, amid price pressure in obesity drugs. But Eli Lilly LLY is now +8% in the pre on Strong 4Q GLP-1 Momentum + Guidance Ahead of Street Quelling Last Minute Fear from NVO Guide. BBG, GS Trading
- NVDA CEO Jensen Huang dismissed fears that artificial intelligence will replace software and related tools, calling the idea "illogical", after a significant selloff in global software stocks on Tuesday. RTRS
- Department of Labor said all agencies will fully resume to normal operations from the 4th of February 2026.
Trade/Tariffs
- US Senators push for USD 70bln funding deal to support US President Trump's critical minerals agenda, FT reported.
- Indian Trade Minister said the US trade deal will offer a competitive advantage to Indian exporters and our priority is to energy security for our citizens. Need to bolster capabilities in many sectors including nuclear energy and data centres. India will raise trade with the US.
A more detailed look at global markets courtesy of Newsquawk
APAC stocks were ultimately mixed as the region partially shrugged off the downbeat handover from Wall Street, where sentiment was mired by renewed tech-selling, while participants in the region also reflected on the latest Chinese PMI data and the end of the partial US government shutdown. ASX 200 climbed higher with the upside led by outperformance in miners as metal prices continued their recovery, but with gains in the index capped by heavy losses in the tech sector. Nikkei 225 slumped at the open but is off worst levels, while risk appetite was pressured following recent earnings, including disappointing results from Nintendo, which saw its shares suffer a double-digit percentage drop. Hang Seng and Shanghai Comp saw two-way price action as participants digested stronger-than-expected Chinese RatingDog Services PMI data, and after the PBoC drained liquidity, while it was also reported that NVIDIA AI chip sales to China are stalled by a US security review and that Chinese customers are meanwhile not placing H200 chip orders with the company.
Top Asian News
- China's market regulator unconditionally approves CATL (3750 HK), Chery (9973 HK) and others joint venture formation.
- China's Vice Finance Minister said China is facing persistent headwinds and policy uncertainty.
- New Zealand ANZ Commodity Price Index MM (Jan) +2.0% (Prev. -2.1%).
European bourses (+0.1%) are broadly firmer across the board, though the DAX 40 (-0.1%) has been pressured by post-earnings losses in Infineon (-2.3%). European sectors hold a positive bias. Telecoms and Chemicals leads whilst Healthcare is the clear laggard, hampered by post-earning losses in Novo Nordisk (-17.6%) and Novartis (-1%). The former reported strong headline metrics, though its 2026 guidance disappointed.
Top European News
- Germany sold EUR 3.197bln vs exp. EUR 4.0bln 2.50% 2032 Bund: b/c 1.51x (prev. 1.2x), average yield 2.60% (prev. 2.33%), retention 20.1 (prev. 23.87%).
- Germany's VDA announces that 2025 EV production comes out at 1.67mln vehicles, +23% Y/Y.
- Europe's safest corporate bond spreads drop to its lowest level since 2007.
Central Banks
- Fed Governor Miran resigned on Tuesday from his position as Chair of Council of Economic Advisers, Barron's reported citing a White House official.
- BoJ won't come to the rescue of a Takaichi-driven bond rout, with sources stating that Japanese PM Takaichi should not count on the BoJ's help in taming sharp yield rises given the high cost of intervention including risk of igniting unwanted yen declines.
- PBoC announces plan to build a multi-level financial service system to support domestic demand, tech innovation and SMEs. To continue to support debt risk resolutions for financing platforms, back local government in market oriented reforms and guide financial institutions to provide services based on marker and legal principles.
- Riksbank Minutes: President Thedeen said "at present I assess that monetary policy is following a stable and reasonable course, and we can tolerate minor deviations in data outcomes without immediately needing to adjust the course we have set.
FX
- DXY resides within a narrow range within Tuesday’s 97.298-97.692 range after seeing weakness yesterday against most major peers, giving back some of the post-ISM spoils, while JOLTS data was delayed, and there were several comments from Fed speakers, but failed to move the dial. Overnight, US President Trump signed the USD 1.2tln spending bill to end the government shutdown, as expected, and thus NFP will likely be released next week (TBC). Today, however, desks are eyeing the private ADP and ISM Services PMIs.
- JPY is the underperformer vs the USD, EUR, and GBP, as the Japanese currency continued to lag amid the ongoing expectations for a landslide victory by Japanese PM Takaichi's ruling LDP at the snap election on Sunday. USD/JPY topped yesterday's 156.08 peak to print a current high of 156.59, but is still some way off the 23rd Jan high of 159.23.
- EUR/USD trades flat with little notable action seen on the Final Services and Composite PMIs. Little move also seen on the EZ HICP metrics, which were broadly in-line / cooler-than-expected. A report which will have little impact on policymakers at the ECB, who are set to meet on Thursday – as a reminder, the Bank is expected to keep its deposit rate steady at 2.00%.