U.S. equity futures traded lower ahead of Thursday’s opening bell, with investors taking a more cautious stance after two consecutive days of gains as renewed geopolitical risks and weakness in technology stocks weighed on sentiment.
Nasdaq 100 futures led the declines, reflecting broad selling pressure across the semiconductor sector.
TSMC drops despite strong quarterly results
Taiwan Semiconductor (NYSE:TSM) was among the biggest movers before the open, with its U.S.-listed shares falling 4.4%.
Although the chipmaker reported second-quarter earnings ahead of expectations, investors focused on the company’s plans to significantly increase capital spending.
“While the case for boosting capacity is clear at a time when there is a large gap between supply and demand, shareholders will want TSMC to retain some discipline even as it looks to meet orders piling up,” said AJ Bell head of markets Dan Coatsworth.
Oil climbs as conflict intensifies
Energy markets also remained in focus as U.S. crude futures climbed back above $80 per barrel following another round of military action between the United States and Iran.
Washington carried out fresh strikes on Iranian targets overnight, while Tehran responded with attacks on U.S. military bases in Gulf nations and warned it could strike “all the infrastructure in the region” if President Donald Trump proceeds with threats against Iranian energy and transport infrastructure.
Inflation data boosts hopes for steady interest rates
Wednesday’s market gains were driven by softer-than-expected producer inflation data.
The Producer Price Index fell 0.3% in June, compared with expectations for a smaller decline, while annual producer inflation slowed to 5.5%.
The latest figures followed weaker consumer inflation data earlier in the week, reinforcing expectations that the Federal Reserve may keep interest rates unchanged.
“Traders are rapidly retreating from rate-hike bets,” FHN Financial Chief Economist Chris Low said. “Fed funds futures see the odds of a hike this month now at 9% and have a hike fully priced in by December. Yesterday, it was September.”
Investors monitor earnings and geopolitics
Despite easing inflation pressures, investors remained focused on the escalating conflict in the Middle East.
President Donald Trump told Fox News that the United States could target Iranian power plants and bridges next week “unless they get to the table and negotiate.”
Brokerage and airline stocks outperformed during Wednesday’s session, while semiconductor, networking and computer hardware companies lagged behind the broader market as investors rotated away from technology.
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