US stock futures faced a challenging start on Wednesday after all three major averages concluded the previous trading session significantly lower. The Dow Jones Industrial Average futures hovered just above the flat line, while S&P 500 futures experienced a modest decline of approximately 0.2%. Futures for the tech-heavy Nasdaq 100 fell by 0.3%, largely influenced by a drop in shares of AMD, an AI chipmaker. Although AMD reported earnings that exceeded estimates, the results failed to impress investors.
On Tuesday, the Nasdaq Composite suffered a steep decline, plummeting over 2%. This downturn was predominantly driven by a significant sell-off in technology stocks, particularly Palantir, which saw its shares tumble nearly 8% despite exceeding third-quarter performance expectations. The high valuation associated with the stock has raised concerns among investors regarding the sustainability of the AI-driven market rally, prompting fears of a potential bubble. Notably, investor Michael Burry’s recent decision to purchase puts against both Palantir and Nvidia has further amplified these concerns. AMD’s disappointing earnings report could potentially intensify this scrutiny.
The earnings calendar for Wednesday features key players such as McDonald’s, Qualcomm, Robinhood, and Toyota, drawing attention from investors eager for insights into market trends. Additionally, market participants are keeping a close watch on the ADP private payrolls report, which may provide valuable information regarding the current labor market. This data is particularly crucial given the ongoing government shutdown, which is also delaying other economic releases and has now reached its longest duration in history.
In political developments, the Trump administration has issued warnings of potential “mass chaos” for travelers, contemplating the closure of airports amidst the shutdown. Furthermore, a significant legal challenge to President Trump’s tariffs is set to unfold as the Supreme Court hears arguments about his legal authority to impose sweeping trade duties. The outcome of this case could have widespread implications for the global economy.
Meanwhile, Asian markets mirrored the declines seen in US indices, reacting negatively to the tech sector’s downturn. Investor enthusiasm for AI investments seems to have peaked, leading to concerns over inflated valuations in the sector. South Korea’s Kospi initially dropped over 6% before recovering to a 3% decrease, while Japan’s Nikkei 225 settled with losses of 2.8%. Hong Kong’s Hang Seng index also experienced a slip, down by 0.5%.
In commodity markets, gold has been struggling to maintain its position around the $4,000 mark after a record-setting rally. A combination of a robust dollar and the Fed’s rate cuts has diminished demand for this traditional safe-haven asset.
