US stock index futures were broadly flat on Tuesday as investors paused following a technology-led rally and turned their attention to developments in the Middle East, the Federal Reserve’s interest rate outlook and a new artificial intelligence processor from Alibaba.
At 03:09 ET (07:09 GMT), Dow Jones futures slipped 25 points, equivalent to 0.1%. S&P 500 and Nasdaq 100 futures were little changed.
The S&P 500 had posted its strongest daily performance since August on Monday, supported by renewed enthusiasm for artificial intelligence companies. Investors were also monitoring oil prices after reports of possible US-Iran diplomatic engagement.
AI Stocks Lead Previous Session’s Gains
Wall Street’s main indices advanced on Monday, with the S&P 500 recording its largest one-day gain since August.
Meta Platforms (NASDAQ:META) contributed to the rally after introducing a new AI model that increased investor interest in autonomous AI agents and their potential use by consumers.
Shares in Meta rose alongside semiconductor manufacturers Advanced Micro Devices (NASDAQ:AMD) and Intel (NASDAQ:INTC). Both companies produce processors used in computing systems supporting AI applications.
The rally followed a period of concern about AI safety, while investors also assessed whether diplomatic developments at the United Nations could reduce tensions in the Middle East.
The benchmark 10-year US Treasury yield edged lower as bond prices increased.
Trump’s UN Address Puts Middle East Conflict in Focus
President Donald Trump is scheduled to address the United Nations General Assembly in New York, where world leaders are discussing the Middle East conflict, the war in Ukraine and AI safety.
US Ambassador to the United Nations Mike Waltz said Trump would:
“highlight how he has and his administration have confronted complex problems head-on around the world”
Waltz also indicated that the president would discuss preventing Iran from acquiring a nuclear weapon.
The address comes amid a conflict between the United States and Iran that began in late February, according to the supplied report.
Fighting in Yemen between Iran-backed Houthi militants and Saudi-aligned forces has added to concerns about regional energy transportation.
The Bab el-Mandeb Strait has become an important route for Saudi oil shipments following severe disruption to traffic through the Strait of Hormuz.
The report states that the United States has declined Saudi Arabia’s requests to participate in military operations against the Houthis. American forces remain involved in protecting regional military facilities and supporting shipping through Hormuz.
Trump has warned Iran’s leadership of further consequences if a settlement is not reached. Tehran has said it would retaliate against additional attacks.
Despite the hostile exchanges, media reports indicate that Trump is open to meeting Iranian President Masoud Pezeshkian during the UN gathering.
No meeting or agreement has been confirmed in the supplied material.
Brent crude futures remained above $100 a barrel, rising 1% to $101.36 at the time of the report.
Musalem Says Further Fed Tightening May Be Needed
St. Louis Federal Reserve President Alberto Musalem said another interest rate increase may be required to contain inflation, particularly as energy prices continue to contribute to price pressures.
Speaking to Reuters on Monday, Musalem suggested that the central bank should act promptly rather than delay a necessary policy response.
He said:
“Persistent demand and recurring supply forces are continuing to contribute to keeping inflation risks elevated, and I judge that without further policy restraint on inflation it is more likely to be substantially above our 2% target in 18 months than at target.”
Musalem did not identify a specific interest rate level that he believes would be sufficient to control inflation.
He is not currently a voting member of the Federal Open Market Committee.
The Fed raised borrowing costs by 25 basis points last week. Policymakers’ updated projections and comments from Fed Chair Kevin Warsh indicated that another increase could follow before the end of the year.
Investors are weighing the implications of additional rate increases for corporate borrowing costs, economic activity and stock market valuations.
Alibaba Announces New Chip and Data Centre Expansion
Alibaba Group (NYSE:BABA) unveiled its Zhenwu V900 artificial intelligence accelerator on Tuesday and outlined plans to increase data centre capacity in the coming years.
Chief Executive Eddie Wu introduced the processor at Alibaba’s annual Apsara Conference in Hangzhou.
The company described the V900 as China’s most powerful AI chip, a claim that was not independently verified in the supplied report.
Alibaba said the processor delivers three times the performance of its predecessor, the Zhenwu M890.
Wu stated:
“The Zhenwu V900 is the most powerful AI chip in China today, delivering three times the performance of its predecessor, the Zhenwu M890.”
According to the company, the chip can operate in clusters of up to 500,000 units for training advanced AI models.
The launch accompanies Alibaba’s planned expansion of its computing infrastructure.
The company did not provide chip pricing, production figures or a detailed timetable for its data centre expansion in the supplied announcement.
Paramount Settles State Challenge to Warner Bros Discovery Deal
Paramount Skydance (NASDAQ:PSKY) reached a settlement on Monday with California and 11 other states over their legal challenge to its proposed $110 billion acquisition of Warner Bros Discovery (NASDAQ:WBD).
The agreement resolves the states’ attempt to block the transaction, although other closing requirements may remain.
California Attorney General Rob Bonta said the settlement includes commitments covering domestic film production and editorial independence.
Paramount must increase annual spending on US film production by at least $300 million.
Following completion of the acquisition, the company must produce 30 films annually for the first two years and 32 films annually for the subsequent three years.
At least four films each year must be independent productions, while no less than 20% of annual output must comprise blockbuster films.
Paramount must also establish a news editorial independence board intended to safeguard editorial autonomy at CBS and CNN.
The settlement establishes these commitments as part of the resolution of the states’ legal challenge.
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