U.S. stock index futures fell on Tuesday as rising oil prices, climbing Treasury yields and fresh doubts about AI spending combined to unsettle investors. Traders also priced in a high chance of a Federal Reserve rate hike on Wednesday, adding to an already fragile backdrop for equities.
At 4:36 a.m. ET, Dow E-minis fell 341 points, or 0.65%. S&P 500 E-minis dropped 39.75 points, or 0.52%. Nasdaq 100 E-minis lost 168.25 points, or 0.58%. Higher crude prices, elevated bond yields and renewed uncertainty over AI demand kept buyers on the sidelines.
AI safety warnings unsettle tech stocks
Alphabet and Microsoft each fell more than 1% premarket, while chipmakers traded within a narrow range after bearing the brunt of Monday's selloff. Nvidia rose marginally.
The latest bout of anxiety stemmed from calls by top AI companies to slow the technology's development, citing safety concerns. There is little clarity so far on how such a slowdown would work, but the declines added to a gloom that above-target inflation and fears of higher borrowing costs had already deepened.
According to Reuters, Nancy Tengler, CEO of Laffer Tengler Investments, said "the AI genie is not going to be put back in the bottle".
Oil and Treasury yields deepen the selloff
The Middle East conflict has shown few signs of easing, keeping oil prices elevated and deepening concerns of a supply shock. Brent crude futures rose more than 2% to $108.06, while U.S. West Texas Intermediate futures traded at $103.76, also up more than 2%.
The 10-year Treasury yield climbed to its highest level since 2007, last up 6.76 basis points at 5.0286%, as investors braced for what many suspect will be the first in a series of rate increases. High yields on risk-free Treasuries dampen the appeal of stocks.
The Labor Department's report last week showed consumer prices accelerated in August, with a key measure of underlying inflation posting its largest increase in four months. Given that backdrop, a solid labor market and a new Fed chair seeking to establish credibility, Wednesday's decision carries the highest odds of a hike markets have seen all year, according to Anthony Saglimbene, chief market strategist at Ameriprise Financial. Still, he said there remains a small chance the Fed holds rates steady instead.
Elsewhere, Dave & Buster's shares tumbled nearly 14% premarket after second-quarter revenue missed expectations. Crypto-linked stocks fell too, after bitcoin slid nearly 3%. Coinbase and Strategy each dropped more than 4.5%.
Source: Investing.com
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