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US futures sink, as tech company outlooks disappoint

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The S&P/ASX 200 recovered from earlier losses but still closed lower on Thursday, dropping 9.70 points or 0.14% to 7,078.00, with information technology shares weighing through the session.

US equity futures dropped, with contracts on the technology-heavy Nasdaq 100 down some 2%, after Facebook parent Meta Platforms and streaming service Spotify Technology plunged in late trading on soggy forecasts. US shares closed up on Wednesday, taking global stocks to their best four-day advance since 2020, but the tech fallout overshadowed that winning run.

Is it time to buy the Meta dip?

Amazon [AMZN] is expected to report a 9.72% rise in revenues and a 72.32% drop in year-over-year earnings per share when it reports its fourth-quarter results on 3 February. Analysts at Zacks forecast that revenues will reach a record high of $US137.76bn, but earnings per share will come in at $US3.90. The Amazon share price is expected to drop on these expected results, as it would mark a continued slowdown from revenue growth of 15% in Q3 and 27% in Q2 owing to higher brick and mortar buying as pandemic-related restrictions are lifted.

Locally, analysts are tipping a difficult earnings season for ASX-listed stocks, with companies with negative, or less-than-positive outlooks expected to be punished.

The impact of the Covid-19 omicron variant, ongoing supply chain disruptions, labour shortages and wages pressure, inflation, the expected rise in the official cash rate in Australia and a more hawkish stance on monetary policy in the US from the Federal Reserve, plus oil price gains from supply and geo-political events will all be in focus as companies report through February.

UBS has started research coverage on major banks with a positive view on the sector...

The broker sees about 10% share price upside across the sector, noting that the banks are "defensive in a volatile and uncertain market," reports The Australian.

Westpac was its top pick and highest conviction Buy rating, where it saw 23% share price upside to $25 over 12 months, ahead of its update this morning.

Westpac on Thursday brought forward plans to restructure and simplify the bank, as pressure on profit margins continues from intense competition in home lending.

Announcing unaudited cash earnings of $1.58bn for the first quarter to December 31, up 1% excluding notable items, chief financial officer Michael Rowland said Westpac had made a sound start to the year, with benefits starting to flow as it aims to slash annual costs to $8bn by 2024.

UBS also has Buy ratings on ANZ and NAB, seeing 13% and 12% upside to respective 12-month targets of $30 and $30.50, but was Neutral on CBA with a $95 target.

"Top down, the base case set-up for the banks is strong, with tailwinds from an improving macro backdrop and gradually rising interest rates supportive of accelerated topline revenue growth and expanding return on equity," UBS says, according to The Australian.

Hong Kong and China markets remain shut for Lunar New Year celebrations.

Sony fell as much as 8.6% in Tokyo on Thursday after cutting its PlayStation 5 sales forecast and announcing weaker-than-expected results from its gaming division over the holiday period. Bloomberg reported that the company slashed its fiscal-year outlook by more than 3 million units to 11.5 million PS5 sales and also warned that supply and logistics challenges will persist through 2022. 

The Aussie dollar is at US71.23c against the US dollar.

Bitcoin is at $US36,948.

Gold is at $US1806.33 an ounce.

Brent crude oil is trading around $US89.84 a barrel.

WTI crude oil is at $US88.23 a barrel.

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