Wall Street stocks looked set for a weaker open on Wednesday as investors lock in profits in technology stocks ahead of crucial earnings from Google owner Alphabet and Tesla, while escalating tensions in the Middle East push oil prices to six-week highs.
Dow Jones futures were down 0.2%, while the S&P 500 was called 0.4% lower and the hardest hit is expected to be the Nasdaq, where futures have dropped 1%, with chipmakers leading the pre-market declines after a sharp rebound in the previous session.
The cautious mood follows a strong rally the day before, when the Dow Jones rose 380 points, or 0.7%, to 52,443, the S&P 500 gained 0.9% to 7,546, and the Nasdaq climbed 1.3% to 29,316, helped by a powerful recovery in semiconductor stocks after weeks of heavy selling.
Earnings from Alphabet and Tesla are due after the bell, with analysts seeing these as key tests for the artificial intelligence trade.
Markets will be watching Alphabet for updates on AI-related capital spending and monetisation, while Tesla’s results are expected to provide fresh detail on autonomous driving, robotics and vehicle demand.
Results from Texas Instruments, IBM and ServiceNow will also be closely watched in the evening, while Philip Morris, GE Vernova and AT&T report before the opening bell.
Chip stocks were under pressure in pre-market trading as investors took profits following a 5.5% jump in the sector the previous session.
Semiconductor stocks have been under heavy pressure in recent weeks as hedge funds aggressively unwound crowded AI trades, driving the sector around 25% below its early June peak.
Tuesday’s rebound came as “the Momo guys [momentum traders] ran out of stock to sell, so the pressure was off,” said market strategist Kenny Polcari at Slatestone Wealth, suggesting the wave of forced selling may have largely run its course.
Meanwhile, Brent crude traded above $94 a barrel after another night of US strikes on Iranian targets and renewed threats to shipping routes in the Middle East from Yemen.
The stronger oil price has revived concerns that inflation could prove more persistent, complicating the Federal Reserve’s policy outlook just as investors had begun to scale back expectations of further interest-rate increases.
“10 straight days of US strikes and continued attacks on military targets have kept a geopolitical premium firmly embedded in oil prices and that will become more of an issue next month and the months after,” said Polcari.
There is little in the way of economic data due on Wednesday, putting more of the onus on corporate earnings and developments in the Middle East.
