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US Stock Futures Fall on Energy Shock and AI Bubble Fears
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US stock futures pointed lower on Thursday as investors weighed renewed energy supply risks and persistent inflation pressures from AI-related capital expenditure, which could prompt further Federal Reserve action. S&P 500 and Nasdaq 100 futures each fell 0.2% by 8 a.m. in New York. Oil prices rose after reports that the White House asked the Pentagon to prepare potential strike options against Iran, possibly before the midterm elections, while Hurricane Isaias developed in the Gulf of Mexico. Fed Governor Christopher Waller indicated further rate hikes may be needed, though policymakers have flexibility on timing. AI remains central to the US earnings season outlook. Deutsche Bank strategists forecast Q3 earnings growth at a historically high 34% year-over-year, with AI-driven demand helping big tech maintain about 54% growth. Citigroup strategists Richard Schlaiter and David Chiu model that 66% of Russell 1000 companies will beat estimates, up from just over 60% in Q2, with tech expected to record the most earnings beats. Global reactions to AI results have been mixed: Samsung's record preliminary quarterly results missed the most optimistic expectations, while TSMC posted 51% sales growth. Policy uncertainty is rising, with an index tracking US economic policy uncertainty posting one of its largest three-year gains. In company news, Broadcom is considering another large deal after launching $6 billion in debt financing to support Anthropic PBC's AI buildout, and SK Hynix's Solidigm has selected lead banks for a planned US IPO next year. Retail stocks will be in focus after PepsiCo cut its profit forecast, citing a slower-than-expected North American recovery, and Levi Strauss reported its slowest direct-to-consumer growth since late 2022, partly due to marketing missteps, while raising its full-year earnings outlook. Palantir Technologies rose in pre-market trading after Goldman Sachs upgraded the stock from neutral to buy, citing its underperformance this year.
Source report
U.S. stock futures pointed to a lower open on Thursday, as investors weighed renewed energy supply risks and persistent inflationary pressures from AI-related capital expenditures — factors that suggest the Federal Reserve may still need to take further action on interest rates.
As of 8 a.m. New York time, S&P 500 futures fell 0.2%, and Nasdaq 100 futures also declined 0.2%.
Energy and Inflation Concerns
Oil prices rose following reports that the White House had asked the Pentagon to prepare potential strike options against Iran, which could be implemented before the midterm elections. Hurricane Isaias was also developing in the Gulf of Mexico, adding to energy supply concerns.
Federal Reserve Governor Christopher Waller said further rate hikes may be necessary to control inflation, while noting that policymakers have flexibility in the timing of action and are not required to raise rates at consecutive meetings.
AI and Earnings Outlook
AI remains central to the U.S. earnings season outlook. Deutsche Bank strategists expect third-quarter earnings growth to remain at a historically high year-over-year rate of 34%, with AI-driven demand helping large tech companies sustain earnings growth of approximately 54%.
A model by Citigroup strategists Richard Schlaiter and David Qiu predicts that 66% of Russell 1000 companies will beat expectations, up from just over 60% in the second quarter. The technology sector is expected to record the most earnings beats.
Global reactions to AI-related results have been mixed. Samsung posted a record preliminary quarterly result but failed to meet the most optimistic expectations, while TSMC achieved 51% sales growth. This contrast comes as investors prepare for the U.S. earnings season, with AI spending and demand expected to remain the dominant theme.
Policy Uncertainty
The policy backdrop is increasingly uncertain. An index tracking U.S. economic policy uncertainty recorded one of its largest gains in three years, despite relatively subdued market volatility.
Corporate News
- Broadcom Inc. is already considering another large-scale deal after launching a $60 billion debt financing to support Anthropic PBC's AI buildout.
- SK Hynix's unit Solidigm has selected lead banks for a planned U.S. IPO next year, according to sources familiar with the matter.
Retail stocks will be in focus on Thursday after PepsiCo lowered its profit forecast, citing a slower-than-expected recovery in North America. Levi Strauss reported its slowest direct-to-consumer growth since late 2022, partly attributed to marketing missteps, while raising its full-year earnings outlook.
Palantir Technologies rose in pre-market trading after Goldman Sachs upgraded the stock from Neutral to Buy, citing its underperformance this year.
Source: Bloomberg
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