US Open: Awaited FOMC meeting and 14% Super Micro Computer sell-off drags sentiments on Wall Street

• U.S. index futures trade roughly flat ahead of Fed decision; tech sector sentiment is weak today; US100 loses 0.17%
• Super Micro Computer's (SMCI.US) weaker-than-forecast earnings trigger a 14% crash in stock prices, and together with AMD's (AMD.US) nearly 8% decline, put downward pressure on the semiconductor sector
• Mastercard (MA.US) loses more than 2% after results, Pfizer (PFE.US) tries to rebound from multi-year lows
• Bitcoin and cryptocurrency price declines put pressure on crypto-related stocks Microstrategy (MSTR.US) and Argo Blockchain (ARGO.US)

After the open, Wall Street is trying to recover from yesterday's sell-off, but the rebound in Nasdaq 100 contracts is not helped by weak sentiment around technology stocks. Results from the maker of server racks used in data centers Super Micro Computer (SMCI.US) preached disappointment, resulting in a double-digit discount for the stock, which is considered by many alongside Nvidia (NVDA.US) as one of the strong benchmarks of the entire AI bull market. After the stronger-than-forecast ADP report, investors are waiting for the manufacturing ISM and JOLTS (3 PM GMT), as well as the Fed decision (7 PM GMT) and Powell's conference (7:30 PM GMT). The dollar is losing slightly at the opening of the session, with USDIDX trading 0.1% lower and oil losing almost 0.8% despite comments by Israeli Prime Minister Netayahu, who conveyed after his meeting with Blinken that abandoning further war in Gaza (Rafah) is not in Israel's focus.

Percentage changes in S&P 500 stocks. Semiconductor, insurance, health services and IT sectors are losing. Block (SQ.US) shares are down more than 6%. Source: xStation5

US500 (M15)

S&P 500 index futures are attempting a small rebound today after yesterday's sell-off, while volume remains relatively light at the opening.

Source: xStation5

Super Micro disappoints Wall Street

Super Micro Computer (SMCI.US) - shares are losing nearly 14% today, as quarterly results indicated a rise in stocks and disappointed in terms of revenues (although these rose 200% y/y). The company, linked to the AI trend, replaced Whirlpool, in the S&P 500 index and the exponential growth of its stock made it one of the main benchmarks for the strength of the AI bull market. The stock wasn't even helped by its sharply higher-than-forecast guidance, for the current quarter. 

• Earnings per share came in at $6.65 versus $5.78 forecasts
• Revenue was $3.85 billion vs. $3.95 billion forecasts
• Gross margin was 15.5% vs. 17.6% in Q1 2023 - in line with Wall Street forecasts
• The company expects current Q2 revenue between $5.1 billion and $5.5 billion vs. $4.73 billion Bloomberg forecasts.
• Earnings per share in Q2 are expected to be $8.42 vs. $6.97 Bloomberg forecasts
• The company's inventory at the end of March 2024 rose to $4.15 billion vs. $1.45 billion a year earlier, lowering free cash flow.

Management comments indicate that Super Micro continues to see steady, high demand for products, and that weaker sales were due to capacity constraints caused by supply problems with some key components. Nevertheless, this disappointment was enough to put pressure on profit realization. Wall Street is also wondering about the company's prospects for profitability growth from new server product lines equipped with special coolers aimed at Nvidia chips. These are expected to hit the market in the second part of the year. Super Micro expects gross margins of between 14 and 17%. According to management comments, buyers of the new server chips will pay only a slightly higher premium for them than for previous-generation chips; analysts have begun to calculate that the company's forecasts indicate expected lower margins from sales. However, the company maintains that the stock will be released around Q4 of this year and does not represent a long-term burden on margins.

Super Micro D1 chart (SMCI.US)

Source: xStation5

News from companies

Pfizer (PFE.US) - shares are trading up 2% at the open, as the company indicated strong drug sales outside of Covid vaccines and beat Q1 revenue and profit forecasts. The company reported $0.55 earnings per share versus $0.51 forecasts and $14.9 billion in sales versus $13.87 billion forecasts. Still, this is the fifth consecutive quarter where the company has seen both profits and sales decline y/y. Sales of Covid-19-related products fell 66% y/y (Comirnaty, Paxlovid) to $2.4 billion from $7.1 billion in Q1 2023, but Pfizer reaffirmed annual sales targets in the range of $58.5 billion to $61.5 billion and raised its earnings per share guidance for the year to a range of $2.15 to $2.35 per share, against a consensus of $2.21. In addition, a quarterly dividend of $0.42 points to a 6.6% annual rate, making Pfizer one of the largest dividend companies in the S&P 500.

Mastercard (MA.US) - The company's shares are losing nearly 4%, as the financial services and card provider lowered its full-year revenue forecast and disappointed expectations for Q1 2024 sales ($6.3 billion vs. $6.34 billion forecast and $5.75 billion in Q1 2023), despite exceeding forecast earnings per share by $0.07 ($3.31 vs. $3.24 expectations and $2.8 in Q1 2023). In the current second quarter, the company expects high single-digit year-on-year earnings growth. Cross-border payment volume increased 16% year-on-year from April 1 to 28, 2024 vs. 18% in Q1 2023. Combined volume also slowed, rising 9% y/y in April vs. 12% in Q1. The company indicated that it is seeing strong demand for its high-margin services and healthy consumption levels, but lowered its annual outlook, likely due to the slowdown in April. Now the company expects low double-digit net earnings growth in 2024 vs high double-digit previously.