Dow Jones futures fell 0.52% to near 48,750 in European trading on Thursday, ahead of the US open. S&P 500 futures slipped 0.05% to about 7,160, while Nasdaq 100 futures rose 0.17% to around 27,370.
US futures were mixed after varied company results and cautious outlooks. Meta Platforms fell 8% in pre-market trade after weaker user growth and lower-than-expected capital spending.
Tech Earnings Drive Diverging Futures
Microsoft dropped nearly 1.5% despite beating revenue and profit estimates and reporting a 40% rise in Azure and cloud revenue. Alphabet climbed 7% after beating first-quarter revenue forecasts, with Google Cloud also ahead of expectations.
Amazon rose about 4% after earnings topped estimates and cloud revenue increased strongly. In Wednesday’s session, the Dow fell 0.57% and the S&P 500 dipped 0.04%, while the Nasdaq 100 added 0.04%.
Markets reacted after the Federal Reserve held rates steady but signalled a firmer approach due to inflation concerns. Morgan Stanley now expects no Fed rate changes through year-end, after previously forecasting cuts in September and December.
The FOMC voted 8-4 to keep rates at 3.5%–3.75%. It was the first time since October 1992 that four members dissented, and it cited inflation remaining elevated, partly linked to higher global energy prices.
Given the market’s mixed signals, we anticipate increased price swings in the coming weeks. The CBOE Volatility Index (VIX) has recently been hovering around 15, which seems low given the clear division within the Federal Reserve. We see this as an opportunity to purchase VIX call options or establish long straddles on specific volatile stocks ahead of their next earnings calls.
Strategy Implications For Volatility And Fed Risk
The sharp divergence in big tech earnings presents a clear path for pairs trading. With global cloud infrastructure spending having grown over 20% in the last reported year, we are favoring companies like Alphabet and Amazon that are excelling in this area. This involves using options to go long on the winners while simultaneously taking bearish positions on firms showing weakness in user growth or forward guidance.
The Federal Reserve’s hawkish stance suggests we should be cautious about the broader market, especially rate-sensitive sectors. This is a significant shift from the sentiment at the end of 2025 when the market was pricing in multiple rate cuts. Consequently, we are using a portion of our portfolio to buy protective puts on the Dow Jones index, which is showing more weakness than the tech-heavy Nasdaq.
The 8-4 split on the FOMC vote is a rare event that signals deep disagreement on the path forward for interest rates. This level of internal conflict, the highest since 1992, means future policy announcements could be unpredictable and cause sharp market reactions. We are therefore positioning to capitalize on overreactions to the next few monthly inflation reports, which will be critical in shaping the Fed’s debate.
