Apple and Amazon to report, Adidas narrows loss forecast - what's moving markets

© Reuters.

Investing.com -- U.S. stock futures slip, suggesting an extension in declines on Wall Street seen in the prior session, as traders continued to gauge the implications of Fitch's downgrade of America's credit rating earlier this week. Elsewhere, investors gear up for the release of quarterly results from tech giants Apple and Amazon, while Adidas sees a smaller 2023 loss thanks to strong sales of its leftover stock of Yeezy shoes.

1. Futures edge lower after sell-off

U.S. stock futures pointed into the red Thursday, a day after a U.S. credit rating downgrade by ratings agency Fitch sparked a sell-off on Wall Street.

At 05:18 ET (09:18 GMT), the Dow futures contract lost 85 points or 0.24%, S&P 500 futures shed 12 points or 0.28%, and Nasdaq futures dipped by 55 points or 0.36%.

The benchmark S&P 500 posted its biggest drop since April in the prior session, while the tech-heavy Nasdaq Composite slumped to its worst day since February.

Fitch lowered the U.S.'s long-term foreign currency issuer default rating to AA+ from the top-most level of AAA on Tuesday, citing worries around the country's fiscal position and governance standards. The announcements cooled a series of recent gains for stocks.

Attention will likely now turn back to this week's flurry of corporate earnings, with tech giants Amazon and Apple set to report their latest quarterly results after the closing bell.

On the economic calendar, investors will have a chance to parse through weekly jobless claims data, which will serve as a prelude to the release of the all-important U.S. jobs report for July on Friday.

2. Qualcomm's sales forecast disappoints

Qualcomm (NASDAQ:QCOM) has unveiled sales guidance for its fiscal fourth quarter that missed expectations and announced plans to slash jobs as recent weakness in the smartphone market failed to ease.

The U.S. chip designer said it now expects revenue in the current three-month period to come in between $8.1 billion to $8.9 billion. Analysts had seen the figure at $8.70B.

A slump in end-user demand for handsets, along with many smartphone makers choosing to use existing chip supplies to manufacture their devices, both factored into the outlook, the company noted. The smartphone market has faced headwinds as inflation-conscious customers rein in spending on non-essential items and replacement cycles lengthen. According to research firm Canalys, global smartphone shipments dropped by 13% in the first quarter of 2023.

Adding to these underlying issues, the San Diego-based business said it now does not foresee "any material revenue" from Huawei because it does not have a license to sell 5G chips to the Chinese telecom group. Qualcomm also flagged that it would likely be hit with "significant" restructuring charges linked to workforce reductions.

Shares in the firm fell sharply in premarket U.S. trading.

3. Apple and Amazon ahead

Major tech sector bellwether Apple (NASDAQ:AAPL) and e-commerce behemoth Amazon (NASDAQ:AMZN) are scheduled to announce their quarterly earnings Thursday, in two of the most closely-watched releases in what has been a busy week of corporate results.

For Apple, analysts mostly expect the California-based iPhone maker to report a third straight quarter of declining revenue. The focus will likely be on any details the company may choose to give about its current quarter, which ends in September.

Apple's fiscal fourth quarter, which typically includes new smartphone releases and back-to-school laptop purchases, can be a signpost for the company's performance heading into the critical holiday season. But the period may have even greater influence this year, as it could provide clues into whether the U.S. economy can avoid a broader meltdown after a string of aggressive Federal Reserve interest rate hikes.

At Amazon, the group's key cloud computing division will be in the spotlight.

Bellevue, Washington-based Amazon previously flagged that a deceleration in growth in the prior quarter at the unit, Amazon Web Services, continued into April. The slowdown may be reflective of a broader weakness in cloud spending as inflationary pressures persuade clients and individuals to pull back on some tech expenditures.

Meanwhile, as it was with their Big Tech peers last week, executives at both Apple and Amazon may also field questions from analysts about their plans to integrate artificial intelligence into their operations.

4. Adidas sees smaller 2023 loss after Yeezy destocking

Adidas (ETR:ADSGN) has narrowed its projected 2023 loss thanks to strong demand for the leftover stock of its Yeezy shoe brand, the German sports apparel group said on Thursday.

The company had halted sales of the sneaker after it cut ties with designer Ye last year following antisemitic remarks made by the rapper formerly known as Kanye West.

In order to avoid a deep write-down on its remaining stock of Yeezy-branded products, Adidas announced in May that it would sell some of this inventory and donate the proceeds to different charities that fight antisemitism and racism.

In the second quarter, these sales generated around €400 million (€1 = $1.0926), leading Adidas to reduce its expected annual loss to €450M, down from its prior guidance for a loss of €700M. Adidas also earmarked €110M for charitable donations.

Analysts cited by Reuters said that a second batch of Yeezy stock sales will likely attract solid demand as well, albeit not as profitable as the initial release. Adidas noted that its full-year outlook does not include the impact of another Yeezy stock drop.

5. Oil retreats amid signs of tightening supplies, Fitch downgrade

Oil prices fell Thursday on worries about the global economic outlook, even after a record drop in U.S. inventories indicated a substantial tightening in crude markets.

Official data, released Wednesday, showed that U.S. crude inventories shrank by over 17 million barrels in the week to July 28 - the biggest drop recorded in data stretching back to 1982.

The Fitch downgrade of the U.S. credit rating also dented risk appetite for a second consecutive day, weighing on oil prices. In the prior session, crude fell from more than three-month highs in the wake of the ratings agency's announcement.

By 05:11 ET, U.S. crude futures traded 0.18% lower at $79.35 a barrel, while the Brent contract dropped 0.24% to $83.00.