Dow Jones futures advance as US Treasury yields, oil prices ease
- US futures indices rise as easing US Treasury yields and falling crude oil prices relieve market pressure.
- 10-year US yields fell to 5.194% while lower energy costs helped offset Middle East supply concerns.
- Bank of America shares fell over 1.5% pre-market following $1.2 billion in penalties for failing to report suspicious transactions.
Dow Jones futures rise by 0.22% to trade near 52,050 during European hours on Wednesday. S&P 500 futures gain 0.10% to trade around 7,870, while Nasdaq 100 futures advance by 0.19% to near 30,850.
US stock futures gain amid easing US Treasury yields and lower oil prices. The yield on the 10-year Treasury note fell for the second consecutive day to 5.194%, while the 30-year yield dropped for a fourth straight session to 5.548%, following both yields hitting multi-decade highs over the past two weeks.
Crude oil prices eased after US President Donald Trump announced that Taiwan will purchase 30% of gas from the Alaska LNG pipeline and invest roughly $4.4 billion, building on South Korea’s $50 billion pledge. Trump reiterated that oil prices will fall soon and predicted the Iran war will end quickly. However, traders remain cautious as escalating hostilities between Saudi Arabia and Iran-backed Houthi rebels continue to fuel fears of Middle East supply disruptions.
Risk aversion decreases following dovish remarks from New York Federal Reserve President John Williams. Speaking on Tuesday, Williams noted that while one more rate hike may be appropriate this year, he foresees no further rate increases in 2027. Consequently, the CME FedWatch Tool shows markets pricing in over a 78% probability that the Fed will hold interest rates steady this month, alongside a 90% chance of a rate hike in December.
Market focus now shifts to the US September CPI inflation report scheduled for release later in the North American session, which could provide clearer guidance on the Fed's policy trajectory. Headline U.S. CPI is expected to rise 3.6% year-over-year in September, up from 3.4% in August, while Core CPI—which excludes volatile food and energy costs—is projected to edge up to 2.5% from 2.4% in the previous month.
During Tuesday’s regular US session, Wall Street indexes closed lower, with the Dow Jones dropping 0.35%, the S&P 500 slipping 0.02%, and the Nasdaq Composite declining 0.15%. Memory chipmakers led losses in the tech sector, as stocks like Micron and SanDisk extended declines amid mounting market concerns over AI-related capital expenditures and intensifying competition from Chinese rivals.
Meanwhile, Bank of America saw its shares fall more than 1.5% in pre-market trading following major regulatory action. Federal regulators imposed over $1.2 billion in penalties on the bank, alleging a multi-year failure to detect and report more than $5 billion in suspicious financial transactions.
AI stocks FAQs
First and foremost, artificial intelligence is an academic discipline that seeks to recreate the cognitive functions, logical understanding, perceptions and pattern recognition of humans in machines. Often abbreviated as AI, artificial intelligence has a number of sub-fields including artificial neural networks, machine learning or predictive analytics, symbolic reasoning, deep learning, natural language processing, speech recognition, image recognition and expert systems. The end goal of the entire field is the creation of artificial general intelligence or AGI. This means producing a machine that can solve arbitrary problems that it has not been trained to solve.
There are a number of different use cases for artificial intelligence. The most well-known of them are generative AI platforms that use training on large language models (LLMs) to answer text-based queries. These include ChatGPT and Google’s Bard platform. Midjourney is a program that generates original images based on user-created text. Other forms of AI utilize probabilistic techniques to determine a quality or perception of an entity, like Upstart’s lending platform, which uses an AI-enhanced credit rating system to determine credit worthiness of applicants by scouring the internet for data related to their career, wealth profile and relationships. Other types of AI use large databases from scientific studies to generate new ideas for possible pharmaceuticals to be tested in laboratories. YouTube, Spotify, Facebook and other content aggregators use AI applications to suggest personalized content to users by collecting and organizing data on their viewing habits.
Nvidia (NVDA) is a semiconductor company that builds both the AI-focused computer chips and some of the platforms that AI engineers use to build their applications. Many proponents view Nvidia as the pick-and-shovel play for the AI revolution since it builds the tools needed to carry out further applications of artificial intelligence. Palantir Technologies (PLTR) is a “big data” analytics company. It has large contracts with the US intelligence community, which uses its Gotham platform to sift through data and determine intelligence leads and inform on pattern recognition. Its Foundry product is used by major corporations to track employee and customer data for use in predictive analytics and discovering anomalies. Microsoft (MSFT) has a large stake in ChatGPT creator OpenAI, the latter of which has not gone public. Microsoft has integrated OpenAI’s technology with its Bing search engine.
Following the introduction of ChatGPT to the general public in late 2022, many stocks associated with AI began to rally. Nvidia for instance advanced well over 200% in the six months following the release. Immediately, pundits on Wall Street began to wonder whether the market was being consumed by another tech bubble. Famous investor Stanley Druckenmiller, who has held major investments in both Palantir and Nvidia, said that bubbles never last just six months. He said that if the excitement over AI did become a bubble, then the extreme valuations would last at least two and a half years or long like the DotCom bubble in the late 1990s. At the midpoint of 2023, the best guess is that the market is not in a bubble, at least for now. Yes, Nvidia traded at 27 times forward sales at that time, but analysts were predicting extremely high revenue growth for years to come. At the height of the DotCom bubble, the NASDAQ 100 traded for 60 times earnings, but in mid-2023 the index traded at 25 times earnings.
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