US equity futures traded lower on Tuesday as the Federal Reserve prepared to begin its two-day policy meeting, with investors also assessing higher Treasury yields, oil prices and developments affecting energy supplies in the Middle East.
Dow futures declined 266 points, or 0.5%, as of 03:20 ET. S&P 500 futures were down 28 points, or 0.4%, while Nasdaq 100 futures fell 90 points, or 0.3%.
The moves followed declines across the main Wall Street indices in the previous session. Semiconductor stocks were among those moving lower, with the Philadelphia Semiconductor Index recording its largest one-day decline since July.
US government bond yields also increased, with the benchmark 10-year Treasury yield moving above 5% for the first time since 2023.
Deutsche Bank analysts said: “It was another session where September lived up to its reputation as the worst month of the year for asset performance, with bonds and equities continuing to struggle.”
The bank’s analysts said they would also be watching US Treasury Secretary Scott Bessent’s testimony before the House Financial Services Committee “to see if he tries to lean in some credible way against the rising tide of bond yields.”
Fed Rate Decision Due Wednesday
The Federal Reserve was set to begin its latest monetary policy meeting on Tuesday before announcing its interest-rate decision on Wednesday.
CME FedWatch indicated that financial markets were assigning a roughly 92% probability to a 25-basis-point increase in the federal funds rate. If the Fed implements such an increase, its target range would rise to 3.75%-4%.
Deutsche Bank said approximately 90 basis points of rate increases were being priced in by the June 2027 Fed meeting, two basis points more than in the previous session.
Investors are assessing the policy outlook against recent economic data showing continued inflationary pressures and resilience in the US labour market.
Middle East Developments Keep Oil Supply in Focus
Oil prices extended their gains on Tuesday as developments in the Middle East continued to affect expectations for regional supply and shipping.
Talks between Iran and Gulf countries concerning the reopening of the Strait of Hormuz remained suspended.
Iran-aligned Houthi forces in Yemen carried out additional strikes against Saudi Arabia on Monday and continued operations around shipping routes in the Red Sea and Bab el-Mandeb Strait.
The latest developments followed attacks that took Saudi Arabia’s East-West pipeline offline. Analysts cited in the source estimated that further disruption could affect supplies equivalent to around 4%-5% of the global total.
Former DeepMind Researcher Raises AI Concerns
Former Google DeepMind research engineer Bilal Chughtai raised concerns about the potential consequences of increasingly capable artificial intelligence systems after recently leaving the company.
Chughtai said he believes that AI systems exceeding human capabilities could potentially emerge within the next several years and pose significant risks.
“I earnestly believe that AI has the potential to kill us all, and that we might be running out of time to avoid this outcome,” Chughtai said on social media.
His comments followed other calls for additional safeguards around advanced AI. Former Anthropic researcher Jacob Coxon said concerns about potential AI risks contributed to his decision to leave the company, while Anthropic Chief Executive Dario Amodei has called for greater regulation and a slower pace of development.
Chinese Industrial Output Beats Expectations
China reported a 5.2% year-on-year increase in industrial production for August, above expectations for 4.8% growth and compared with 4.5% in the previous month.
The source linked part of the increase to overseas demand for Chinese products, including batteries, electronic components and networking equipment.
Fixed-asset investment declined 7.2% in the year through August, compared with expectations for a 7.0% fall. The measure of public and private capital spending has been negative since April.
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