Stock market today: futures drop after Starbucks and McDonald's misses

• US futures slid as traders weighed Amazon's earnings beat against Starbucks and McDonald's misses.
• The earnings suggest AI demand remains robust but consumer spending may be slowing.
• The Federal Reserve is set to provide an update later on the likely trajectory of interest rates.

Stocks slid ahead of Wednesday's market open as traders weighed an earnings beat by Amazon against signs of consumer weakness in Starbucks and McDonald's results, and waited for the Federal Reserve's updated outlook on interest rates later in the day.

Futures underlying the S&P 500 were down 0.2% shortly after 5 a.m. ET, while Nasdaq 100 futures were down 0.6%, and Dow Jones Industrial Average futures were down 0.1%.

The key 10-year Treasury yield was little moved at 4.69%, while the US Dollar Index edged up 0.2% to 106.4 points.

Amazon's first-quarter earnings surpassed Wall Street's forecasts for net sales and earnings per share, partly due to a strong performance by the Amazon Web Services business.

"Amazon added another piece to the AI puzzle revealing that demand for AI remained robust in the first three months of the year, but the stock price rose less than 2% in the after-hours trading as a weak sales forecast for the current quarter tempered optimism regarding the Q1 results," said Ipek Ozardeskaya, a senior analyst at Swissquote Bank, in a morning note.

Yet the good news was offset by Starbucks posting lower-than-expected revenue, earnings, and same-store sales growth as customers visited less and ordered fewer items. The bleak update sent the stock down 12% in after-hours trading.

McDonald's also fell short of Wall Street's revenue, earnings, and same-store sales estimates for last quarter as consumers spent less at the fast-food chain.

A painful combination of historic inflation and soaring interest rates over the past couple of years have squeezed household budgets and stoked concern of a recession.

Consumers have faced sharp increases in food, energy, and housing costs, and higher monthly payments for credit cards, car leases, and mortgage payments. As a result, many have tapped their savings, racked up credit-card debt, and put less money away each month.

Fed Chair Jerome Powell is expected to announce the results of the US central bank's two-day meeting on monetary policy later. Stubborn inflation in recent months has dampened Wall Street's hopes that the Fed will cut rates in the months ahead.

"Mood among investors is not cheery into the Fed's latest monetary policy decision due later today," Ozkardeskaya said. "And it's understandable. The Fed must respond to a three straight month jump in inflation and probably take a step back in its plans to cut the interest rates this year. There is even a risk that the Fed drops the expectation of a rate cut in 2024."

Meanwhile, Tesla fell 5.5% on Tuesday and is set to open lower after Elon Musk's EV maker announced more job cuts, including the team behind its Supercharging network. 

Mastercard, Pfizer, and GSK are among the companies set to report earnings later. The economic calendar promises fresh figures for monthly employment, auto sales, and construction spending.