S&P 500 and Nasdaq futures inched higher on Wednesday as investors awaited the Federal Reserve's monetary policy verdict against a backdrop of simmering Middle East tensions, while chip stocks struggled ahead of Big Tech earnings later this week. Global markets have been volatile this month as investors questioned the sustainability of the AI spending boom after signs that major U.S. companies were deepening a web of AI-linked investments and continuing to funnel billions into the technology at the expense of free cash flow.
The scrutiny comes as competition from China heats up, both in the race to develop advanced chips and as Chinese firms roll out cheaper AI models. On Wednesday, the rout extended from Asia through Europe after South Korean chipmaker SK Hynix's (000660.KS), opens new tab bumper quarterly results fell short of lofty investor expectations. U.S.-listed shares of the company dipped 1.2% in premarket trading, while other chip stocks seesawed in volatile trade. Nvidia (NVDA.O), opens new tab inched up 0.1%, Intel (INTC.O), opens new tab climbed 1.4%, Applied Materials (AMAT.O), opens new tab dropped 3.2% and Sandisk (SNDK.O), opens new tab edged down 0.3%. Data storage provider Seagate Technology (STX.O), opens new tab was a bright spot, climbing 5.7% after forecasting quarterly results above estimates. KLA Corp (KLAC.O), opens new tab, meanwhile, forecast stronger-than-expected first-quarter revenue, but its shares fell 7.5% as investors sought more. Results from Microsoft (MSFT.O), opens new tab, Meta (META.O), opens new tab, Amazon.com (AMZN.O), opens new tab and Apple (AAPL.O), opens new tab later this week will be closely watched for signs that their billion-dollar AI investments were boosting earnings. Shares of the companies were marginally higher.
At 7:09 a.m. ET, Dow E-minis were down 146 points, or 0.28%, and S&P 500 E-minis were up 17.5 points, or 0.23%. Nasdaq 100 E-minis were up 67 points, or 0.24%. Tech concerns have pushed the Nasdaq (.IXIC), opens new tab to a three-month low, prompting investors to focus on other areas of the market such as consumer staples (.SPLRCS), opens new tab and healthcare (.SPXHC), opens new tab. The blue-chip Dow (.DJI), opens new tab is also at a two-week high.
The Fed will announce its monetary policy verdict at 2:00 p.m. ET against the backdrop of crude prices soaring by 4.4% to $87.75 a barrel, as tensions in the Middle East flared up.
"With oil prices remaining volatile and inflation expectations at risk of de-anchoring, we don't expect the Fed can hold with the same conviction it's shown recently," said Michael McGowan, chief investment strategist at Pathstone. "If the Fed holds, potential dissents in favor of hikes could be an interesting tell." Traders see a 38% chance of a rate hike, according to LSEG data, following a report showing that price pressures eased in the prior month. Still, markets expect rates to rise by at least 25 basis points by year-end, as tariff costs and higher energy prices feed into inflation
Markets will scrutinize Chairman Kevin Warsh's comments following the decision to gauge his tone on monetary policy at a time when he has said that the central bank will avoid offering any guidance on interest rates. Ford Motor (F.N), opens new tab gained 5.5% after raising its annual profit outlook for a second time this year. The second-quarter earnings season has reflected healthy corporate performance, with 85.2% of the 169 S&P 500 companies that have reported earnings having surpassed expectations, LSEG-compiled data showed. Historically, 68% of companies have achieved that feat
