US stock futures fell on Thursday, October 29, putting the S&P 500 on track to snap a three-session winning streak, as disappointing earnings from Alphabet and Caterpillar weighed on investor sentiment and revived concerns over artificial intelligence (AI) spending and returns.
Futures tied to the S&P 500 declined 0.5%, while Nasdaq-100 futures fell 1.3%. Dow Jones Industrial Average futures lost 171 points, or 0.3%, as investors assessed the latest batch of corporate earnings following the Federal Reserve’s interest rate decision on Wednesday.
Alphabet shares tumbled around 11% in premarket trading after the Google parent reported third-quarter adjusted earnings per share and revenue below analysts’ expectations. The company also posted negative free cash flow of $9.07 billion, drawing attention to the costs of its AI investments.
Alphabet maintained its full-year capital expenditure guidance at $195 billion to $205 billion. While its cloud business recorded growth of 103%, concerns over cash flow and the returns on its AI investments weighed on the stock.
Caterpillar shares fall 9% after Q3 results
Caterpillar shares dropped around 9% in premarket trading despite the industrial equipment maker reporting better-than-expected third-quarter revenue and earnings. Sales in its construction industries business, however, came in slightly below estimates, weighing on investor sentiment.
The declines in Alphabet and Caterpillar added to pressure on US equity futures as investors digested corporate earnings and reassessed valuations across sectors.
Technology stocks also came under pressure after Microsoft and Alphabet reported quarterly results. Microsoft beat analysts’ expectations for both revenue and earnings, while Alphabet’s revenue fell short of estimates, raising questions about whether heavy AI investments are translating into sufficient financial returns.
US GDP growth beats estimates, inflation accelerates
Investors were also assessing fresh economic data after the US economy grew 3.4% in the third quarter, exceeding the Dow Jones consensus estimate of 3.1%.
However, inflation remained a concern. The personal consumption expenditures (PCE) price index rose 0.5% in September, taking the annual inflation rate to 3.6%.
The combination of stronger economic growth and persistent inflation could complicate the Federal Reserve’s policy outlook, keeping investors focused on the path of interest rates alongside corporate earnings and AI-related spending.