U.S. stock futures showed modest gains on Wednesday as investors tentatively returned to technology shares after a sharp pullback that had taken the Nasdaq 100 down by more than $1 trillion in market capitalization over the prior sessions. The retreat came after concerns surfaced around heavy debt-funded spending by hyperscalers and the prospect of a more hawkish stance from the Federal Reserve following a dramatic run-up in AI-related names that had pushed major indexes to record highs.
Memory-chip makers were among the early beneficiaries in premarket trading, recovering from a steep drop the previous session. Micron Technology and Sandisk climbed 3.8% and 3.5%, respectively, as markets positioned ahead of Micron’s quarterly report due after the bell. Micron’s stock has surged 268% so far this year, and its upcoming results are being watched closely for clues on the memory and AI sectors after the intense rally.
Jay Woods, chief market strategist at Freedom Capital Markets, noted the symbolic role Micron now plays in the recent move. "We will all be looking at Micron since that is a representation of what we’ve seen in this rally. I think people are going to get the blowout quarter that they expect, but I don’t expect the stock to continue to rise," he said. Woods also pointed out that Micron has been followed by declines after six of its last eight earnings reports despite reporting blowout earnings.
On the futures boards at 04:53 a.m. ET, Dow E-minis were trading down 76 points, or 0.15%, S&P 500 E-minis were up 7.5 points, or 0.1%, and Nasdaq 100 E-minis were up 141.25 points, or 0.48%.
Investors remained attentive to developments in the Middle East after the United States and Iran issued conflicting accounts on several key matters, including financial incentives for Iran, control over the Strait of Hormuz and Israel’s war in Lebanon. Those geopolitical frictions added an additional layer of uncertainty for global markets.
Despite the recent volatility, optimism tied to a potential end to the war and expectations for strong corporate earnings growth have positioned the S&P 500 to post its strongest quarterly gain in six years - even as markets brace for higher interest rates. Traders have increased bets on a second rate hike from the Federal Reserve by the end of December, according to the CME Group’s FedWatch tool, shifting from an earlier consensus that priced in a single 25-basis-point increase.
That shift in expectations followed comments from new Fed chair Kevin Warsh emphasizing the need to tame inflation. Market participants will also be watching the Personal Consumption Expenditures (PCE) Price Index - the Fed’s preferred inflation measure - when it is released on Thursday. Economists surveyed expect the PCE reading to rise to 4.1%, a level described in reports as more than twice the central bank’s stated target.
In individual stock moves during early trading, Cerebras Systems plunged 14% after the chip designer warned that full-year profit margins would fall below first-quarter levels in its initial quarterly report following its public listing. Separately, FedEx shares dropped 7.8% after the company reported that margins in its core delivery business narrowed in the latest quarter compared with the year-ago period.
Market participants are parsing these disparate signals - robust demand in AI-related hardware contrasted with margin pressures at logistics providers and warnings of tighter monetary policy - to gauge which pockets of the market can sustain gains and which may be vulnerable to a rotation or further pullback.