S&P 500 futures muted as investors await big bank earnings; chip weakness weighs
Futures tied to the S&P 500 were muted on Tuesday, with major US banks scheduled to report earnings while weakness in chip stocks weighed on Nasdaq futures.
Hopes of a strong earnings season have lately propped up the broader US equity market amid growing geopolitical concerns, surging government bond yields and inflation worries.
Top lenders JPMorgan Chase, Wells Fargo, Goldman Sachs and Citigroup are slated to report third-quarter results before the bell. Their shares ticked up between 0.4% and 1.4% in premarket trading.
Earnings for the broader S&P 500 for the July-September quarter are expected to grow 30.6%, with technology and energy companies expected to gain the most, according to data compiled by LSEG.
At 5:50 a.m. ET, Dow E-minis were up 319 points, or 0.61%, and S&P 500 E-minis were up 2 points, or 0.03%. Nasdaq 100 E-minis were down 157.25 points, or 0.51%.
US chipmakers were again under pressure after a selloff on Monday. Chip giant Nvidia shed 0.5% while AMD and Marvell Technology eased 1.2% and 2.4%, respectively.
Memory chipmaker Micron Technology dipped 2.8% while data storage companies Western Digital, Seagate and Sandisk dropped between 3.5% and 4.5% each.
“The biggest concern is around potential competition from China’s CXMT,” said Nic Puckrin, cross-asset analyst and founder of Coin Bureau, pointing to media reports about the progress made by the Chinese memory chip maker.
“That’s direct competition for Samsung and SK Hynix, whose enormous profits have been driven as much by supply constraints as insatiable demand. This is why we’re seeing such violent moves in the South Korean stock market, but US chipmakers also aren’t immune.”
Broadcom CEO Hock Tan said on Monday capital would be the biggest constraint facing the company, as AI development continues, and likened some of the investment flow into the broader sector to “casino gambling.”
Meanwhile, oil prices fell as traders assessed supply risks from attacks on Saudi Arabia while weighing the prospect of additional diesel supplies from Russia.
Surging crude oil prices due to the US-Iran conflict have raised concerns of energy-related inflation worldwide, forcing central banks to adopt a tougher stance on monetary policy to combat inflation.
A September reading of US consumer and producer prices as well as retail sales figures due later this week could shed more light on the inflation front and help steer expectations of future monetary policy.
Traders widely expect the Federal Reserve to hold rates steady this month, but a December hike remains on the cards, according to CME FedWatch.
The recent rise in US bond yields has been due to stronger economic growth and large-scale investment in AI rather than to higher inflation expectations, which remain “well anchored,” US Federal Reserve Governor Christopher Waller said.
The recent rise in US bond yields reflects stronger economic growth rather than higher inflation expectations, which remain “well anchored”, Federal Reserve Governor Christopher Waller said on Tuesday.
Yields on 10-year US Treasury debt have climbed to 24-year highs in recent days, with analysts putting that down to concerns about war-driven inflation as well as ballooning government debt and massive investment in AI.
Waller, a member of the Fed’s Board of Governors, downplayed the role of inflation in the bond selloff, putting the emphasis on economic strength, AI spending and broader concerns about debt.
“Inflation expectations are well anchored, so all of the build-up (in yields) is not coming from an inflation premium,” Waller told a Bloomberg event in Mumbai. “That’s not where it’s coming from. So it is a factor of real growth.”
He also cited academic research suggesting US government debt had lost some of its status as a global safe-haven asset over the past two years, reducing demand and potentially adding 50 to 70 basis points to yields.
