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Investing.com - S&P 500 and Nasdaq futures edge up, indicating a potentially positive start to the final trading day of October. Shares of both Amazon and Apple rise premarket as quarterly earnings and forecasts from the tech titans get a welcome reception from investors. Nvidia announces a new supply deal with South Korea, while factory activity in China shrinks by more than expected.
1. Futures rise
U.S. stock futures pointed mostly higher on Friday, with investors ending the month of October with both a fresh slate of tech earnings and signs of cooling global trade tensions to assess.
By 02:20 ET (06:20 GMT), the Dow futures contract was broadly unchanged, while S&P 500 futures gained 42 points, or 0.6%, and Nasdaq 100 futures added 290 points, or 1.1%.
The main averages on Wall Street fell in the prior session, pulled down by a decline in shares of Facebook-owner Meta Platforms and software giant Microsoft. Both unveiled plans to ratchet up already sky-high spending on artificial intelligence in their latest earnings updates, exacerbating some investor concerns around the possibility of squeezed profit margins and uncertainty over when returns from these investments will be seen.
Meta shares slumped by 11.3%, their biggest one-day decline in three years, and Microsoft dipped 2.9%, although Google-parent Alphabet climbed by 2.5% on results that topped expectations thanks to solid advertising and cloud computing returns.
Federal Reserve Chair Jerome Powell’s comment that another interest rate cut in December was "far from" a foregone conclusion dented expectations for more accomodative monetary policy, while trade agreements reached at a long-awaited meeting between U.S. President Donald Trump and Chinese President Xi Jinping did little to alter sentiment.
AI-darling Nvidia, whose meteoric rise made it the first company to exceed $5 market value earlier this week, also retreated by 2%.
2. Cloud strength helps power Amazon earnings
Amazon cited strong demand in AI and core infrastructure as a driver behind higher-than-anticipated quarterly earnings, sending shares sharply higher in premarket U.S. trading.
Third-quarter revenue rose 13% versus a year ago to $180.2 billion, above expectations of $177.75 billion. The e-commerce giant also earned $1.95 a share, beating analysts’ estimates of $1.56 despite expenses related to a one-time charge from a legal settlement and workforce reductions.
Despite being viewed by some observers as a relative laggard in the AI arms race, top-line growth at its Amazon Web Services cloud division -- which has become largely tied to its ambitions in the nascent technology -- came in at 20%, the fastest increase since 2022.
In the current quarter, a period that includes the key holiday shopping season, sales are anticipated to stand at between $206 billion to $213 billion, implying growth of 10% to 13%, broadly in line with Wall Street forecasts. It projected operating income of $21 billion to $26 billion.
The group added that it shelled out almost $90 billion in capital expenditures in the first nine months of the year, as it looks to bolster its AI offerings considered to be central to the future success of the business. For the year as a whole, the spending is forecast to reach $125 billion.
3. Apple’s sunny holiday-quarter outlook
Shares of Apple also rose premarket, buoyed by an upbeat outlook from the California gadget maker.
The company, another major traditional beneficiary of the end-of-year shopping spree, said it now expects total revenue to rise by 10% to 12% during the holiday quarter, well above Wall Street estimates.
Underpinning these forecasts were expectations that customers would largely opt to upgrade to Apple’s latest version of its flagship device, the iPhone 17. In the build-up to Thursday’s after-hours earnings release, recent data had suggested that the iPhone 17 has been well-received around the world, outpacing demand for its previous models in its key U.S. and Chinese markets in particular.
Speaking to CNBC, CEO Tim Cook said the iPhone 17 would lead to the best December quarter "in the history of the company."
Still, iPhone sales of $49 billion were slightly below projections in the September quarter, as CFO Kevan Parekh flagged headwinds from supply constraints. Apple reported fiscal fourth-quarter earnings of $1.85 per share on revenue of $102.5 billion. Analysts had anticipated $1.76 and $1.02 billion, respectively.
AI investments, an area in which Apple is seen as possibly falling behind, are anticipated to rise as well, and were highlighted as a reason why December-quarter operating expenses are tipped to be $1.5 billion above forecasts.
4. Nvidia unveils plan to ship over 260,000 advanced AI chips to South Korea
Nvidia has said that it will send more than 260,000 of its cutting-edge AI chips to the South Korean government and high-profile businesses in the Asian nation, such as Samsung Electronics.
Along with SK Group and Hyundai Motor, Samsung will each deploy up to 50,000 AI chips in smart factories in the country, while Korea’s government is aiming to use its own batch of Nvidia’s latest processors to invest in domestic AI development.
"Just as Korea’s physical factories have inspired the world with sophisticated ships, cars, chips and electronics, the nation can now produce intelligence as a new export that will drive global transformation," Nvidia CEO Jensen Huang said in a statement.
However, Huang, who met with Korean President Lee Jae Myung and corporate leaders on the sidelines of an event in the city of Gyeongju, did not provide details on the value of the deal nor when the supplies would be sent.
Friday’s announcement comes after a frenzy of recent dealmaking that has helped to solidify Nvidia’s place as perhaps the poster child of the AI craze.
5. Chinese factory activity shrinks
Chinese manufacturing activity shrank more than expected in October, official purchasing managers index data showed, as weak local demand and slowing economic momentum continued to chip away at the sector.
Manufacturing PMI fell to 49.0 in October, missing expectations of 49.6 and falling from the 49.8 print seen in September.
A reading below 50 indicates contraction, with China’s manufacturing sector now having languished in that territory for seven consecutive months.
The PMI data, which is a sentiment-based survey, showed Chinese manufacturers remained largely cautious due to sluggish domestic demand and still high U.S. trade tariffs on exports.
Friday’s data underscored the potential need for more economic support from Beijing, as China grapples with sustained deflation, weak private spending and dwindling private investment.