U.S. stock futures experienced a drop as Wall Street continued to grapple with a second consecutive challenging day for AI-related trading.
Futures for the Dow Jones Industrial Average fell by 0.1%, while those for the S&P 500 and Nasdaq 100 saw slight increases of 0.2% and 0.5%, respectively.
After the market closed, Cerebras, an AI chip manufacturer, reported its inaugural earnings since going public. However, the company’s stock took a hit as investors reacted negatively to earnings suggesting potential struggles against larger competitors like Nvidia.
Similarly, FedEx’s stock declined following its earnings announcement, with the company citing trade policy shifts as significant challenges ahead.
On Tuesday, most stocks fell during the day, largely driven by selling pressure from memory chip manufacturers, including Nvidia, Micron, and AMD. There’s a growing unease within Wall Street regarding the valuation of AI, especially given the substantial investments flowing into the area.
Micron is set to release its earnings by the end of Wednesday, and many are watching closely to gauge the market’s confidence in AI. The company’s stock has surged over 250% this year, yet it dropped 13% on Tuesday.
Meanwhile, discussions remain uncertain regarding U.S.-Iran negotiations. President Trump has pledged to keep tolls in the Strait of Hormuz free, but Iran and Oman are reportedly initiating talks about implementing a toll collection system.
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Alphabet replaces Verizon in Dow Jones
Alphabet is set to join the Dow Jones Industrial Average on June 29, taking the place of Verizon Communications. This shift is intended to better mirror the evolving sectors within the U.S. economy.
Alphabet’s addition will bolster the DJIA’s exposure to areas like artificial intelligence, cloud services, healthcare tech, and digital advertising, according to a statement from S&P Dow Jones Indices.
It was noted that Alphabet’s substantial market capitalization and diverse business operations make it a leading figure in the telecommunications services sector. Additionally, since the Dow is weighted by stock prices, Verizon’s lower-priced shares have had minimal impact on the index’s overall performance, even though Verizon stock has appreciated about 14% since the start of the year.
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Market decline causes liquidity decline, gold sinks below $4,100
Gold has seen a further decrease, driven by a tech-led selloff on Wall Street, prompting investors to cut back on their bullion holdings to offset losses elsewhere.
In pre-market trading, spot gold dipped by 1.7%, dropping below $4,100 per ounce after reaching a two-week low. As U.S. Treasuries rallied, the value of gold has risen for many buyers, compounded by a 0.4% increase in the dollar gauge.
While gold is typically viewed as a safe investment, it often declines during significant market downturns due to its role as a source of liquidity. Asian markets are expected to continue facing losses, amid growing concerns that the AI-driven stock surge may have overshot its mark.
The ongoing tech slump is exacerbating pressure on gold, already affected by fears that persistent inflation risks could lead the U.S. Federal Reserve to hike interest rates. The recently adopted hawkish stance by the new Federal Reserve Chairman has unsettled investors, mitigating any positive effects from a recent peace agreement between the U.S. and Iran. Rising borrowing costs present a challenge for low-yielding precious metals.
