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Global equities climbed on earnings and data, but US indices trailed Europe’s record highs.
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Tech earnings disappoint, raising concerns over AI spending and trade uncertainty.
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With Nasdaq 100 stuck below 21,800, a tech slump could trigger broader volatility.
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In the first half of Thursday’s session, global equities and US index futures pushed higher as investors navigated the busiest day of the earnings season. Treasury yields remained near recent lows, and this also helped to bolster risk sentiment, particularly in the absence of any fresh geopolitical trade tensions.
In Europe, the STOXX 600, DAX and FTSE 100 all hit fresh record highs, driven by an encouraging set of corporate earnings, a surprisingly strong German Factory Orders report, and ongoing expectations that interest rates will be lowered further in the coming months. UK stocks outperformed, with the pound weakening on the back of a poor construction PMI reading.
However, we haven’t seen any new all-time highs in US indices or futures yet, and that may be a sign that the bullish momentum may be waning for US stocks. Yesterday saw Wall Street close higher with optimism partly stemming from President Donald Trump’s decision to delay tariffs on Mexico and Canada.
Traders took this as a sign of flexibility in his broader trade approach, though uncertainty lingers over whether he is willing to strike a deal with China’s Xi Jinping. The 10% tariff threat remains in place, and Trump’s remarks suggest he is in no rush to engage in fresh negotiations. For now, investors have shrugged off the recent earnings misses from tech firms. But if more companies start missing earnings, then we could see market stage a mini correction.
Volatility Eases as Focus Returns to Economic Indicators
After the recent turbulence triggered by US trade policies, markets are showing signs of stabilization. Investors are shifting their attention back to the economy, corporate earnings, and the outlook for interest rates. The 10-year Treasury yield hovered near its lowest level since mid-December after Treasury Secretary Scott Bessent reiterated his commitment to reducing long-term borrowing costs.
Lower bond yields, coupled with solid earnings growth, continue to provide a supportive backdrop for equity markets, despite lingering concerns around trade and inflation. That said, the biggest wildcard remains Trump’s unpredictable protectionist tweets and off-the-cuff remarks, which could upend sentiment in an instant.
Earnings in the Spotlight: Amazon, Qualcomm, and Alphabet
On the earnings front, Amazon (NASDAQ:AMZN) is set to release its quarterly results, with market watchers keenly focused on its artificial intelligence spending plans. This follows last week’s emergence of a cost-effective AI model from Chinese start-up DeepSeek, which has raised competitive concerns within the sector.
Elsewhere, Qualcomm (NASDAQ:QCOM) delivered better-than-expected first-quarter earnings, buoyed by a resurgence in smartphone demand driven by AI. However, the chipmaker cautioned that sales growth in its key patent licensing division will stall following the expiration of an agreement with Huawei. This warning led to a drop in Qualcomm’s share price in extended trading.
Meanwhile, Alphabet (NASDAQ:GOOGL) saw its shares plunge yesterday after missing revenue forecasts. Investors were particularly alarmed by slowing cloud revenue growth, which slipped from 35% to 30% in the latest quarter.
Additionally, Alphabet’s ambitious capital expenditure plans—set at $75 billion for 2025, significantly above the expected $58 billion—sparked fears of overinvestment in AI. The recent developments at DeepSeek have further compounded these concerns.
Advanced Micro Devices (NASDAQ:AMD) also felt the heat, with its stock taking a hit after reporting weaker-than-anticipated Q4 revenues, raising fresh questions about the semiconductor sector’s near-term growth prospects.
US Jobs Data Could Shape Fed Rate Expectations
Beyond corporate earnings, investors are bracing for key macroeconomic data. Today’s US initial jobless claims report precedes Friday’s closely watched nonfarm payroll figures. The January report is expected to show job additions slowing to 154,000, down from 256,000 in December, while the unemployment rate is projected to hold steady at 4.1%.
Any signs of labor market weakness could fuel expectations of a Federal Reserve rate cut, potentially providing further support for equities. As investors juggle earnings releases and economic data, all eyes will be on whether the rally in risk assets has further to run.
Nasdaq 100 trade ideas and key levels to watch
Despite the recovery, the Nasdaq 100 remains inside a large consolidation pattern that has been in place since December, as you can see on the Nasdaq futures chart. The lack of a breakout to new all-time highs despite the recent optimism in certain sectors of the market is a sign of concern. A few major technology stocks have underperformed lately and all it takes is a big plunge in a stock like Nvidia (NASDAQ:NVDA) to cause panic in the sector. So, tread carefully as investors weigh the risks facing markets.
In terms of levels to watch, well the area north of the 21,800 zone is where the next band of resistance on the Nasdaq futures come into play. Here, the index has repeatedly found resistance in the past and unless we see some solid earnings in the sector, the recent AI spending concerns could upend this latest rally. In addition to horizontal resistance, a short-term bear trend also converges here. Meanwhile, short-term support is seen at around 21,600, followed by 21,500.
But even if the index were to retreat from here, the bullish trend will remain in place until we potentially see a more significant breakdown of long-term support levels – for example those in the region between 20,700 and 21,000. In other words, there is room for some manoeuvre before the bears come to the party.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.