Stock Futures Decline on Growth Stock Earnings Worries, Fed Inflation Metric Looms

Major stock indexes fell in premarket trading on Thursday, February 29, 2024,  as investors reacted negatively to earnings reports from several prominent companies and braced for the release of the Federal Reserve's preferred inflation gauge. 

Salesforce and Snowflake Stumble After Results

Shares of customer relationship management software provider Salesforce, Inc. (NYSE:$CRM) dropped 1% in premarket trading after the company provided lighter-than-expected revenue guidance for the current quarter. While Salesforce beat earnings expectations for its fiscal fourth quarter and authorized an additional $10 billion for stock buybacks, its bleak revenue outlook signaled challenges ahead. 

The stock slide spread to other software firms, with data analytics provider Snowflake Inc. (NYSE: $SNOW) seeing its shares plunge 20% premarket. Snowflake beat expectations for the fourth quarter but provided disappointing product revenue guidance for the new fiscal year. The company also announced that CEO Frank Slootman will retire, raising uncertainty. 

The weak results from these software leaders cast doubts on the growth trajectories for the sector and contributed to the downbeat market sentiment.

All Eyes on PCE Inflation Data 

The major stock indexes are poised to close out February with gains, but inflation remains a central concern. Traders are keenly focused on the January personal consumption expenditures (PCE) price index set to be released Thursday morning. 

The PCE index is closely watched by the Federal Reserve as their preferred gauge of inflation. Economists expect the headline PCE index to rise 0.3% month-over-month and the core index, which excludes volatile food and energy costs, to increase 0.4%. On an annual basis, headline PCE inflation is projected to ease slightly to 2.4%, with core PCE ticking down to 2.8%.

While those readings would reflect some incremental progress in the fight against inflation, they are still well above the Fed's 2% target. Persistently elevated inflation raises the risk of more aggressive tightening by the central bank. Markets are currently betting on rate cuts starting in June, but a hotter-than-expected PCE print could alter expectations.

Major Indexes Edge Lower

With investors anxious about inflation and company outlooks, futures tied to the Dow Jones Industrial Average fell 78 points or 0.2% ahead of the opening bell. S&P 500 and Nasdaq 100 futures also ticked down marginally. 

On Wednesday, February 28, 2024,  the stock market rally paused as the Dow and S&P 500 edged 0.06% and 0.17% lower, respectively. The tech-heavy Nasdaq Composite retreated 0.55%. The indexes are working to add to January's powerful gains despite recent inflation and interest rate concerns.

Software stocks could be a drag on tech benchmarks following the Salesforce and Snowflake reports. However, networking firm Okta surged 23% premarket after beating expectations and raising guidance. Bitcoin also rebounded back above $61,000 after dipping below $60,000. The cryptocurrency has seen massive volatility coinciding with its recent push toward all-time highs.

More Key Earnings Due

The tail end of earnings season continues Thursday 28th Feb, 2024  with reports expected from prominent retailers Best Buy and Bath & Body Works parent L Brands. Tech company Hewlett Packard Enterprise also releases quarterly results.

Investors are examining corporate reports closely for signals about consumer demand and business conditions in the face of economic uncertainties. While many mega cap technology companies have disappointed recently, pockets of strength can be found. Networking giant Cisco Systems jumped over 5% on Wednesday after its solid results and upbeat guidance.