U.S. stock futures traded little changed early Tuesday, bracing for a packed week of earnings from major technology companies and a closely watched Federal Reserve announcement.
Technology Shares Pull Back as Wall Street Eyes Big Tech Earnings
Major stock benchmarks diverged on Tuesday as traders digested a fresh wave of corporate results while semiconductor names extended losses to a third consecutive session. The Dow Jones Industrial Average opened higher, rising 282.8 points, or 0.54%, to 52,492.88 according to Reuters data. At the same time, the S&P 500 slipped 17.6 points, or 0.24%, to 7,395.55. The S&P 500 Index finished flat on Monday, erasing an early morning rally as chipmakers weakened, pushing the Philadelphia Semiconductor Index down for a third consecutive session. The Nasdaq 100 Index shed 0.3% to close at its lowest level since early May, while the Philadelphia Semiconductor Index dropped 2.2%, finishing at its lowest since May 19 after falling as much as 5.1%. Chip stocks Sandisk Corp., Advanced Micro Devices Inc. and Nvidia Corp. were among the S&P 500’s biggest decliners. The tech-heavy Nasdaq Composite felt the sharpest pressure, dropping 107.0 points, or 0.43%, to 24,825.07 at the opening bell. The pullback reflected broader caution across global markets regarding AI chip stocks.
Federal Reserve Rate Decision and Market Expectations
Investors are also preparing for a Federal Reserve rate decision scheduled for Wednesday. Market participants widely anticipate that the central bank will keep rates on hold while seeking clearer guidance on the future trajectory of monetary policy. He noted specifically that the 5-year yield is rich relative to the curve, an unusual condition for the central bank to initiate hikes.
“If we’re wrong and the Fed does hike (whether at this meeting or the next), the curve structure suggests that any hikes delivered will be subsequently reversed, and the funds rate ends up lower than it is today within a 12-month window.”
Padhraic Garvey, regional head of research for the Americas at ING
Crude Oil Prices Ease Amid Strait of Hormuz Talks
Outside of equities, traders kept a close watch on energy markets as Iran held discussions with officials from Saudi Arabia and Oman aimed at reopening shipping lanes along the Strait of Hormuz. Crude oil prices added to sharp losses from the previous session as Brent crude fell 1.7% to $86.82 per barrel. West Texas Intermediate dropped 1.6% to settle at $81.31 per barrel. Later, oil pushed back above $100 as Middle East tensions escalated, with WTI settling at $102.88 and Brent briefly topping $116.
While the diplomatic talks provided some relief to commodity markets, corporate earnings elsewhere continued to drive individual stock movements. Sherwin-Williams rose more than 7% following better-than-expected second-quarter results to lead the benchmark higher, and Coca-Cola gained more than 4% following an earnings beat. Conversely, semiconductor-related equities faced continued downward momentum, with the VanEck Semiconductor ETF (SMH) shedding 3%, led by a 7% decline in Micron. Arm Holdings and Teradyne also fell more than 6%. Micron Technology fell 10% Monday, extending a post-earnings slide that’s now ~30% from recent highs. Motley Fool analyst Seth Jayson wrote, Every single HBM chip Micron can make this year is already spoken for.
He concluded, The question is, of course, when does the typical cyclicality return? Right now everyone believes it's gone forever. Unlikely.
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