Apple Drops 4.5% Premarket as Nasdaq-100 Correction Meets Election Day

U.S. stock index futures pointed in different directions early Tuesday as investors waited for the results of the midterm elections. Apple fell 4.5% in premarket trading after warning that rising memory chip costs could squeeze its profit margins in the holiday quarter, according to Reuters, as reported by Hindustan Times.

The move came a day after the Nasdaq-100 closed more than 10% below its record closing high, which confirmed that the technology-heavy index has entered a correction. Worries about how much Big Tech is spending on artificial intelligence, along with oil prices and Iran tensions, are weighing on sentiment.

The numbers behind the morning

• 4.5%: Apple's premarket drop. The company beat Wall Street expectations on strong iPhone sales, but its warning about memory chip costs overshadowed the results.
• More than 10%: How far the Nasdaq-100 closed below its record closing high on Monday, which meets the common definition of a market correction.
• 219 points, or 0.42%: The fall in Dow E-mini futures at 5:06 a.m. ET.
• 1.5 points, or 0.02%: The gain in S&P 500 E-mini futures, which were nearly flat.
• 130.5 points, or 0.46%: The gain in Nasdaq-100 E-mini futures.
• 6.3%: Palantir's drop in premarket trading, even though the company forecast fourth-quarter revenue above market expectations after better-than-expected third-quarter results.

Why tech is under pressure

Reuters reported that investors are concerned major technology companies are spending heavily on AI without having shown enough returns. That has raised doubts about whether the spending will eventually pay off.

Several of these companies have recently raised money in bond markets to fund AI projects. Investors worry that such debt-financed investments will be harder to justify if borrowing costs rise.

Chip stocks offered some relief. Nvidia gained 1.6% after falling for four straight sessions, and Advanced Micro Devices rose 2.8% ahead of quarterly results due after the market closed. Marvell Technology and Intel also moved higher. Last week Apple overtook Nvidia as the world's most valuable company after Nvidia's heavy losses.

What analysts say about the election

Voters are deciding the balance of power in Congress on Nov. 3, in what also serves as a test of public opinion on the first two years of President Donald Trump's second term. Opinion polls and nonpartisan analysts suggest Democrats are likely to win the House from Republicans, while control of the Senate remains uncertain.

Societe Generale analysts said worries about government spending and widening budget deficits have kept growing and have fed market volatility. They noted that any major spending increase would need lengthy negotiations, and that a Democratic House could make it harder to pass new laws and spending plans.

Morgan Stanley analysts said the elections could remove a major source of uncertainty for stocks. They also said they believe the correction that began in June is in its final stages. J.P. Morgan analysts said they see any drop in stocks caused by geopolitical tensions as a possible buying opportunity. These are the analysts' views, as cited by Reuters.

Iran and oil

Oil prices rose Tuesday after falling in the previous session, amid fresh concern about the conflict between the United States and Iran. An Iranian official said an agreement to end the war was not close, while the United States struck Iran's Qeshm Island, according to Reuters.

Investors are also watching whether Washington might launch new attacks on Iran after the midterms, something Trump had hinted at in recent weeks. Asked by reporters on Monday if he was considering another strike after the elections, Trump answered no, Reuters reported.

Why it matters for markets and investors

The Nasdaq-100 correction shows how sensitive the market has become to the cost and payoff of AI investment, which has driven much of the technology sector's recent performance. Apple's warning on memory chip costs adds a separate concern about profit margins at one of the largest companies in the index.

At the same time, election results, oil prices and the Iran conflict are all adding to uncertainty on a single day, which helps explain why the major futures contracts were moving in different directions rather than together.

What to watch next

Earnings season remains busy. Pfizer, Archer-Daniels-Midland and Marathon Petroleum were scheduled to report before Tuesday's opening bell, and AMD was due to report after the close. Elsewhere, Aehr Test Systems rose 14.6% after raising its full-year revenue forecast, and Harmonic gained 16.1% after lifting its own full-year revenue forecast.

Around Prague, based on reporting by Hindustan Times