Wall Street looked set for a cautious start on Wednesday, with U.S. stock futures hovering near the flatline as weakness in technology stocks, rising oil prices and elevated bond yields weighed on investor sentiment.
At the latest pre-market reading, Dow Jones futures were up 23 points, or 0.04%, at 53,426, while S&P 500 futures gained 0.07% to 7,719.25. Nasdaq-100 futures slipped 13.75 points, or 0.05%, to 29,572.25, signalling continued pressure on technology stocks.
Here are the three key factors keeping Wall Street under pressure:
Tech Slump
Technology shares continued to feel the heat after Tuesday's sell-off. Oracle fell nearly 1% in pre-market trading after The Wall Street Journal, citing sources, reported that OpenAI's second-quarter results had disappointed investors.
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While OpenAI's revenue grew 18% between the first and second quarters, its losses also widened, raising concerns over the huge costs involved in the artificial intelligence race.
The report weighed on other technology names as well, with Alphabet, Marvell and Intel trading lower in early action. The pressure comes a day after chip and AI-linked stocks were among the biggest losers on Wall Street.
Oil Jitters
Crude prices added to the market's concerns. Brent crude rose about 1% to around $91.92 a barrel, while West Texas Intermediate was around $85.67 a barrel in the latest data.
Oil has been rising amid renewed uncertainty over the Strait of Hormuz and conflicting claims from Washington and Tehran over whether the key shipping route is open. Reuters reported that Brent climbed to a three-week high on Wednesday as most shipowners continued to avoid the route.
U.S. President Donald Trump said on Tuesday that no talks were underway with Iran and maintained that the Strait of Hormuz was open, contradicting Tehran's position that the route remained closed.
Higher crude prices are fuelling concerns about inflation and could keep interest rates elevated for longer, putting further pressure on equities.
Fed Fears
The pressure on stocks is also coming from the bond market. Major U.S. averages fell on Tuesday as government bond yields across the world surged to multi-year highs.
The 30-year U.S. Treasury yield touched a 19-year high, while Japan's 10-year government bond yield reached its highest level in three decades. Germany's 30-year bund yield climbed to its highest since 2011, while France's 30-year borrowing cost reached its highest level since 2008.
Investors will now turn their attention to the Federal Reserve's July meeting minutes, due later on Wednesday. The minutes could offer more clues on the sharp divide within the central bank after three officials dissented in favour of a rate hike at the July meeting. Still, some investors remain confident that corporate earnings can withstand the pressure.
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