U.S. stock index futures were subdued on Thursday as investors took a break after a two-day rally, and chip stocks continued to trade lower ahead of key economic releases and another round of corporate earnings.
Semiconductor names extended losses from the previous session, when market flows had favored megacap technology stocks and banks following robust results from major lenders. U.S.-listed shares of Taiwan Semiconductor Manufacturing Co (TSMC) slipped 3.2% in premarket trading, despite the chipmaker reporting a 77% increase in second-quarter profit that exceeded market expectations and announcing plans to invest an additional $100 billion in the United States.
Memory-chip manufacturers were among the heaviest decliners, with Western Digital down 3.9% and Seagate Technology off 3.3% in early trading. Those declines followed the broader pullback in chip stocks even as some individual firms posted strong quarterly performance.
Wall Street’s principal indexes had climbed for a second consecutive session on Wednesday after the Producer Price Index came in softer than expected. The gentler-than-anticipated wholesale inflation reading eased concerns about rising prices and the risk of tighter Federal Reserve policy, and it followed benign consumer inflation data reported earlier in the week. A solid start to the second-quarter earnings season also bolstered sentiment, even as U.S.-Iran tensions remained a background risk.
"While geopolitical dynamics may trigger setbacks, earnings should remain the key driver of performance for the remainder of the year," said Mark Haefele, chief investment officer at UBS Global Wealth Management. "In fact, with the U.S. second-quarter earnings season kicking off with solid beats, we expect another strong set of results in the coming weeks."
As of 5:18 a.m. ET, Dow E-minis were down 9 points, or 0.02%, S&P 500 E-minis were down 1 point, or 0.01%, and Nasdaq 100 E-minis were down 63.75 points, or 0.21%.
Investors will be watching retail sales data and weekly jobless claims at 8:30 a.m. ET for further clues on whether economic momentum is cooling enough to contain inflation without triggering growth worries. Markets were pricing in a 10.2% probability that the Federal Reserve would raise interest rates by 25 basis points at this month’s policy meeting, according to CME’s FedWatch tool.
The benchmark S&P 500 has risen more than 10% year-to-date and sits close to its June record close, leaving the recent rally vulnerable to any disappointing economic readings or earnings misses.
On the corporate front, United Airlines shares fell 2.3% after a renewed rally in oil prices pressured the carrier’s profit outlook for the third quarter and the full year. UnitedHealth Group is scheduled to report results before the market opens, while Netflix will report after the close.
With the second-quarter reporting season underway and inflation data showing signs of moderation, investors are balancing upbeat earnings beats against geopolitical risks and sensitivity to economic releases that could affect Fed policy expectations.