Key facts
- US equity-index futures declined as investors weighed earnings from AI heavyweights.
- Alphabet Inc. dropped nearly 5% after lifting its full-year capital expenditure forecast.
- Tesla Inc. missed earnings expectations.
- International Business Machines Corp. lowered its full-year sales outlook.
- Oil prices extended their rally, with Brent briefly topping $95.
- Escalating US-Iran tensions raised concerns about inflation and interest rates.
US equity-index futures declined in early Thursday trading as investors assessed earnings from technology giants for evidence that surging capital spending on artificial intelligence is translating into growth. Oil extended its rally amid escalating geopolitical tensions.
Alphabet Inc. dropped nearly 5% in late trading after lifting its full-year capital expenditure forecast, even as its cloud revenue beat estimates. Tesla Inc. missed earnings expectations, while International Business Machines Corp. lowered its full-year sales outlook. The S&P 500 futures fell 0.2% and Nasdaq 100 futures slipped 0.4%.
Traders are scrutinizing earnings reports from major tech companies to justify their significant investments in AI. "We remain constructive on AI’s growth story, but we favor a more balanced exposure across the AI value chain," said Ulrike Hoffmann-Burchardi at UBS Chief Investment Office, advising investors to ensure diversification beyond AI.
Geopolitical developments also weighed on markets, with the US and Iran signaling no immediate return to negotiations after escalating attacks. Brent crude oil briefly topped $95, fueling concerns about inflationary pressures ahead of the Federal Reserve’s policy meeting. Money markets indicate a roughly 30% chance of a rate hike.
"Diplomatic efforts to end the conflict in the Middle East have effectively stalled as military strikes continue with no sign of easing," said Ian Lyngen at BMO Capital Markets. "The rally in energy continues to weigh on the Treasury market as hostilities between the US and Iran intensify."