US stock futures flounder amid tech weakness, Fed caution

Investing.com-- U.S. stock index futures moved little on Wednesday evening as sustained weakness in technology shares and growing uncertainty over the Federal Reserve’s plans for interest rates kept investors to the sidelines.

Futures were muted after a negative session on Wall Street, where declines in tech shares and hawkish signals from the Fed largely offset some positive retail earnings.

S&P 500 Futures fell slightly to 6,411.25 points, while Nasdaq 100 Futures were flat at 23,323.50 points by 19:14 ET (23:14 GMT). Dow Jones Futures fell 0.1% to 44,973.0 points. 

Tech shares see extended losses on AI doubts 

Tech shares saw another day of outsized selling, with the so-called Magnificent Seven Complex sinking between 0.1% and 2%. Apple (NASDAQ:AAPL) was the worst performer with a near 2% drop, while Nvidia (NASDAQ:NVDA) fell the least after steep losses earlier this week.

Tech shares were hit chiefly by growing doubts over the profitability of artificial intelligence, especially following a highly critical report released from a branch of the Massachusetts Institute of Technology.

The report said 95% of organizations were seeing “zero return” on their AI investments, raising doubts over the hype around AI, which has been a key drive of Wall Street and tech stocks this year. 

The report comes just a week before quarterly earnings from AI bellwether Nvidia, which will be closely watched for more cues on the fast-growing industry. 

OpenAI CEO Sam Altman had also warned late last week that an AI bubble may be forming.

Losses in tech saw the S&P 500 close down 0.2% at 6,395.79 points on Wednesday. The NASDAQ Composite fell 0.7% to 21,172.86 points, while the Dow Jones Industrial Average was flat at 44,938.06 points. 

Fed minutes ring hawkish as Jackson Hole looms 

Wall Street indexes were also spooked by somewhat hawkish signals from the minutes of the Fed’s July meeting.

The minutes showed a bulk of Fed members largely supported the central bank’s wait-and-see approach to cutting interest rates, amid caution over the inflationary impact of President Donald Trump’s trade tariffs. 

The central bank was also seen prioritizing inflation risks over fears of a decline in the U.S. labor market, which could elicit another hold in September.

Markets were seen trimming their bets on a September rate cut after the minutes. Fed fund futures are pricing in a 80.6% chance the Fed will cut rates by 25 basis points in September, down from yesterday’s probability of 84.4%, CME Fedwatch showed. 

Fed Chair Jerome Powell is now set to speak at the Jackson Hole Symposium on Friday, offering up more cues on policy. Powell’s address comes after some soft readings on consumer inflation and payrolls in July, which had boosted expectations for a September rate cut.

Retail earnings spur limited cheer, Walmart awaited 

Some positive quarterly earnings from major retailers TJX Companies Inc (NYSE:TJX) and Lowe’s Companies Inc (NYSE:LOW) did little to lift Wall Street, with both stocks logging small gains.

Target (NYSE:TGT) slid nearly 7% even as its earnings beat relatively low expectations. The company named insider Michael Fiddelke as its new CEO, replacing long-time CEO Brian Cornell.

Retail giant Walmart Inc (NYSE:WMT) is now set to report earnings on Thursday, offering up more cues on the U.S. consumer.