US stock futures traded modestly higher on Wednesday as investors remained cautious ahead of the US Federal Reserve’s policy decision, while renewed hostilities in the Middle East reignited geopolitical tensions after several days of relative calm.
Futures linked to the S&P 500 and Nasdaq 100 rose 0.2% each, while Dow Jones Industrial Average futures slipped 106 points, or 0.2%. The sell-off in semiconductor stocks also continued. US-listed shares of SK Hynix fell another 2.1% in premarket trading, extending losses after the stock dropped below its IPO price.
In Asia, major benchmark indices ended lower. South Korea’s Kospi plunged 6%, while Japan’s Nikkei 225 declined 1.49%.
The sharp decline in Seoul was driven by SK Hynix after the chipmaker reported quarterly operating profit that, despite surging nearly sixfold year on year, fell short of analysts’ expectations. The disappointing results extended the stock’s rout, with more than $700 billion erased from its market value in just over a month.
Focus shifts to Fed policy decision
Investors are now awaiting the US Federal Reserve’s interest rate decision, due later on Wednesday. With inflation still well above the central bank’s 2% target and unemployment holding at a relatively low 4.2%, the Fed is widely expected to keep interest rates unchanged.
However, markets continue to price in roughly a one-third probability of a 25-basis-point rate hike, highlighting unusually high uncertainty this close to a policy announcement. While higher borrowing costs typically weigh on equities, persistent inflation has kept policymakers wary of easing monetary policy too soon.
Rising energy prices have also increased the likelihood of another rate hike compared with expectations for rate cuts earlier this year. At its June policy meeting, the Federal Reserve left the federal funds rate unchanged at 3.50%-3.75% for a fourth consecutive meeting.
Meta, Microsoft earnings in focus
On the corporate front, investors will closely watch quarterly earnings from Meta Platforms and Microsoft, as the AI-driven rally continues to lose momentum. Markets are increasingly questioning whether the massive investments in artificial intelligence infrastructure will generate sufficient returns.
Although both companies are expected to post robust earnings growth, Wall Street will be looking for evidence that their heavy AI spending is beginning to translate into sustainable profitability.
Oil rebounds as Middle East tensions flare again
After three consecutive sessions of losses, crude oil prices rebounded as renewed conflict in the Middle East revived concerns over potential supply disruptions.
A days-long lull in hostilities ended abruptly after Iran launched attacks on US forces stationed across the Middle East overnight, while the United States and Saudi Arabia targeted Tehran-backed militias in Iraq.
Brent crude, the international benchmark, climbed 3.1% to $84.58 a barrel, while US benchmark WTI crude rose $3.78, or nearly 4.8%, to $83.04 a barrel.
The recent optimism over a possible diplomatic breakthrough between the United States and Iran, which had pushed crude prices nearly 14% lower from last week’s peak, has faded following the latest escalation.
The renewed conflict has underscored just how fragile the ceasefire hopes remain and has prompted traders to rebuild the geopolitical risk premium into oil prices.
On the diplomatic front, Iran rejected Oman’s proposal for a 50-50 joint management arrangement for the Strait of Hormuz, insisting that Tehran retain full control over the inbound shipping lane and part of the outbound route.
(With inputs from agencies)
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
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