Investing.com — Wall Street looks set to open on a negative note Wednesday, with second-quarter results from tech giants Alphabet (NASDAQ:) and Tesla underwhelming. The U.S. political situation remains volatile, while the Eurpean earnings season hits top gear
1. Alphabet and Tesla underwhelm
Alphabet (NASDAQ:) and Tesla (NASDAQ:) have started the ball rolling, in terms of the market-leading mega caps reporting, and investors were left underwhelmed.
Tesla stock slumped 7% in after-hours trading after the electric vehicle manufacturer reported its lowest profit margin in more than five years in the second quarter, as it cut prices to revive demand while it increased spending on AI projects.
Net income was $1.48 billion in the second quarter, compared with $2.70 billion a year ago, with adjusted earnings of 52 cents per share missing the consensus of 62 cents, as calculated by LSEG.
The bottom line was pressured by a fall in automotive sales to $18.53 billion from $20.42 billion a year earlier and weaker-than-expected margins amid pressure from EV price cuts, restructuring charges and costs related to investment into AI projects.
Alphabet stock dropped just over 2% after hours despite the Google parent beating second-quarter revenue and profit estimates, driven by a rise in digital advertising sales and healthy demand for its cloud computing services.
However, the tech giant also warned that capital expenses would remain high for the year.
Advertising sales, Alphabet’s chief revenue source, rose 11% to $64.6 billion, while net income in the quarter rose 28.6% to $23.6 billion, beating the average estimate of $22.9 billion.
Total revenue grew 14% to $84.74 billion, while ad sales in its YouTube division rose 13% to $8.67 billion. Revenue from cloud computing services, a widely watched barometer for the health of enterprise technology spending, rose 28.8% to $10.35 billion.
All good news, but investors appeared to have been unnerved by capital expenditure jumping 91% to $12 billion in the quarter as Alphabet raced to roll out AI offerings.
Four of the five remaining Magnificent 7 mega caps – Meta Platforms (NASDAQ:), Microsoft (NASDAQ:), Amazon (NASDAQ:) and Apple (NASDAQ:) – report next week. Investors must wait until later in August for AI darling Nvidia’s (NASDAQ:) numbers.
2. Futures lower as disappointing tech earnings weigh
U.S. stock futures fell Wednesday, weighed by the disappointing reception of second-quarter results from tech giants Alphabet and Tesla.
By 04:00 ET (08:00 GMT), the contract was 190 points, or 0.5%, lower, dropped 38 points, or 0.7%, and fell by 195 points, or 1%.
The disappointing results from Alphabet and Tesla [see above] have hit sentiment Wednesday, with the tech-heavy leading the way lower.
There are more corporate results due Thursday, including numbers from AT&T (NYSE:), General Dynamics (NYSE:) and Boston Scientific (NYSE:).
At the start of the week, around 20% of the companies had reported their second-quarter earnings, with 80% of them topping expectations, according to FactSet data.
3. Opinion poll lead for Harris
The latest opinion poll, from Reuters/Ipsos, gave Vice President Kamala Harris a slight lead over Republican presidential candidate Donald Trump in the wake of President Joe Biden pulling out of the election race.
The poll showed Harris leading Trump 44% to 42%, and was conducted between July 22 and July 23.
This lead was still within the margin of error of plus or minus three percentage points, but it still showed a slight improvement for the Democrats after other recent national polls had shown Trump, before Biden’s announcement, with a small advantage.
Trump will attempt to regain the initiative later Wednesday, as he is set to hold his first campaign rally since Biden’s withdrawal in Charlotte, North Carolina, a state that will be an important battleground in the Nov. 5 election.
Harris held a rally on Tuesday in Milwaukee, Wisconsin, which hosted the Republican National Convention last week, and will head to Indianapolis later Wednesday for another event.
4. Banks lead European earnings
The earnings season is also in full stride in Europe, with the banking sector to the fore.
Deutsche Bank (NYSE:) stock slumped 8% after the German lender reported its first quarterly loss in four years, as it made a provision for an ongoing lawsuit over its Postbank division.
BNP Paribas (OTC:) stock fell 2% after the eurozone’s biggest bank reported a sharp drop in net interest income at its French retail business, even as it posted better-than-expected quarterly earnings after investment banking revenue jumped due to a surge in equities trading.
Elsewhere, LVMH (EPA:) stock fell over 5% after the world’s biggest luxury group reported second-quarter sales growth below consensus estimates; Remy Cointreau (EPA:) stock fell 2% after the drinks giant reported a steeper-than-expected first-quarter sales decline as its problems in the U.S. spread to its liqueurs and spirits division; and easyJet (LON:) stock soared over 6% after the low-cost carrier reported a 16% jump in profits while forecasting a record-breaking summer.
5. Crude boosted by falling US stockpiles
Crude prices rose Wednesday, snapping three straight sessions of decline, as falling inventories boosted demand hopes from the world’s largest consumer.
By 04:00 ET, the U.S. crude futures (WTI) climbed 0.6% to $77.41 a barrel, while the contract rose 0.5% to $81.45 a barrel.
Data from the showed U.S. oil inventories shrank by 3.9 million barrels last week, compared with expectations for a build of 0.7 million barrels.
The API data, if confirmed by official inventory data due later in the session, showed inventories shrinking for a fourth consecutive week, as oil demand likely picked up with the travel-heavy summer season.
Both contracts had lost between 5% and 7% over the previous three sessions, tumbling to their weakest levels since early-June.
