Tech Weakness May Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to move to the downside as trading resumes following the long Presidents’ Day weekend.

Weakness among technology stocks may continue to weigh on Wall Street, as reflected by the 0.9 percent slump the tech-heavy Nasdaq 100 futures.

Concerns about potential disruptions caused by the artificial intelligence buildout have recently led investors to sell tech stocks, which had helped lead the markets to record highs.

“Investors are increasingly questioning whether the marginal dollar spent on AI will generate the expected return,” said Daniela Hathorn, Senior Market Analyst at Capital.com. “At the same time, market uncertainty is rising as new AI models frequently disrupt established players.”

“With competitive dynamics evolving rapidly, it is unclear who the long-term winners will be,” she added. “This uncertainty has led to underperformance across much of big tech, even as the broader market remains relatively resilient.”

Overall trading activity may be somewhat subdued, however, as traders look ahead to the release of key economic data in the coming days.

A report on personal income and spending in the month of December is likely to attract attention, as it includes the Federal Reserve’s preferred readings on inflation.

The minutes of the Fed’s latest monetary policy meeting may also shed additional light on the outlook for interest rates.

After showing a lack of direction early in the session, stocks saw some strength in afternoon trading on Friday before once again giving back ground going into the end of the day. The major averages eventually ended the day narrowly mixed.

While the tech-heavy Nasdaq dipped 50.48 points or 0.2 percent to 22,546.67, adding to the steep loss posted on Thursday, the S&P 500 inched crept up 3.41 points or 0.1 percent to 6,836.17 and the Dow inched up 48.95 points or 0.1 percent to 49,500.93.

For the week, the Nasdaq tumbled by 2.1 percent, while the S&P 500 and the Dow slumped by 1.4 percent and 1.2 percent, respectively.

The choppy trading on Wall Street came even after the release of the Labor Department’s highly anticipated report on consumer price inflation in the month of January.

The report showed consumer prices rose by slightly less than expected on a monthly basis, while the annual rate of growth slowed by more than anticipated.

The Labor Department said its consumer price index rose by 0.2 percent in January after climbing by 0.3 percent in December. Economists had expected prices to rise by another 0.3 percent.

The annual rate of growth by consumer prices slowed to 2.4 percent in January from 2.7 percent in December, coming in below estimates of 2.5 percent.

Meanwhile, the Labor Department said core consumer prices, which exclude food and energy prices, increased by 0.3 percent in January after rising by 0.2 percent in December, matching expectations.

The annual rate of growth by core consumer prices dipped to 2.5 percent in January from 2.6 percent in December, which was also in line with estimates.

The tamer-than-expected headline inflation data led to some renewed optimism about the outlook for interest rates and a continued slump by treasury yields.

“This print strengthens the case that the Federal Reserve can maintain a gradual easing bias without fearing renewed inflation pressure,” said Daniela Hathorn, Senior Market Analyst at Capital.com.

She added, “Importantly, while the labor market remains resilient, today’s CPI reduces the risk that strong employment data forces the Fed into a hawkish rethink.”

However, traders continued to express concerns about potential disruptions caused by the recent artificial intelligence buildout, keeping buying interest subdued.

“Some are concerned about excessive levels of spending and others fear AI will disrupt multiple industries,” said Russ Mould, investment director at AJ Bell. “It all adds up to a cocktail of worries and that’s bad for market sentiment more broadly.”

Despite the lackluster performance by the broader markets, gold stocks moved sharply higher along with the price of the previous metal, resulting in a 5.6 percent spike by the NYSE Arca Gold Bugs Index.

Considerable strength was also visible among computer hardware stocks, as reflected by the 2.7 percent surge by the NYSE Arca Computer Hardware Index.

Networking, utilities, natural gas and transportation stocks also turned in strong performances on the day, while steel stocks moved to the downside amid a report President Donald Trump plans to roll back tariffs on steel and aluminum.

Commodity, Currency Markets

Crude oil futures are climbing $0.53 to $63.42 a barrel after inching up $0.05 to $62.89 a barrel last Friday. Meanwhile, after surging $97.90 to $5,046.30 an ounce in the previous session, gold futures are plunging $115.60 to $9,30.70 an ounce.

On the currency front, the U.S. dollar is trading at 153.26 yen compared to the 153.51 yen it fetched on Monday. Against the euro, the dollar is trading at $1.1818 compared to yesterday’s $1.1850.

Asia

Asian stocks ended mixed on Tuesday as investors monitored the latest developments on the geopolitical front and awaited cues from upcoming U.S. economic readings, including gross domestic product data, PCE inflation figures and minutes from the Federal Reserve’s last meeting.

Trading volumes were thin as markets in mainland China, Hong Kong, Singapore, Taiwan and South Korea were closed for the Lunar New Year holidays.

Gold extended losses to dip below $4,900 an ounce, pressured by easing geopolitical tensions ahead of the second round of talks in Geneva between the United States and Iran.

Representatives of Ukraine and Russia will also meet in Geneva today and tomorrow for a fresh round of U.S.-mediated peace talks.

The talks will be held in a trilateral format, involving representatives from Russia, the United States and Ukraine.

The dollar strengthened, while oil prices fell on oversupply concerns following reports that OPEC+ is considering resuming output hikes in April.

Japanese markets ended lower and the yen fluctuated as soft GDP data released Monday dented sentiment.

Amid speculation over the fiscal and monetary policy path, Bank of Japan Governor Kazuo Ueda said he discussed economic and financial conditions in general with Prime Minister Sanae Takaichi during a regular meeting.

The Nikkei 225 Index fell 0.4 percent to 56,566.49, extending losses for the fourth consecutive session amid expectations that the Bank of Japan will hike interest rates in April. The broader Topix Index settled 0.7 percent lower at 3,761.55.

Australian markets eked out modest gains as minutes from the Reserve Bank of Australia’s February monetary policy meeting reinforced a tightening bias without committing to May action.

The benchmark S&P/ASX 200 Index edged up by 0.2 percent to 8,958.90, extending gains from the previous session. The broader All Ordinaries Index settled 0.2 percent higher at 9,182.50. Mining heavyweight BHP Billiton soared 4.7 percent after reporting a jump in half-year net profit.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index fell 0.7 percent to 13,031.62, extending declines for a third straight session and reaching the lowest level in over four months.

A2 Milk Company shares rallied 6.6 percent. The diary group raised its full-year revenue growth outlook after delivering strong first-half sales in formula and nutritionals on strong sales momentum in China.

Europe

European stocks were flat to slightly higher on Tuesday, with geopolitics and upcoming U.S. economic data in the spotlight.

Defense stocks were mostly lower amid easing geopolitical tensions in Iran and Russia.

The British pound fell against the euro and dollar as weak labor market data reinforced expectations that the Bank of England may cut interest rates as soon as March.

Official data showed the U.K. jobless rate rose to 5.2 percent in the fourth quarter from 5.1 percent in the preceding period.

Annual growth in employees’ average earnings including bonus was 4.2 percent but weaker than the forecast of 4.6 percent. In January, payroll employees decreased 11,000 from the previous month to 30.3 million.

Elsewhere, Destatis confirmed that German consumer price inflation rebounded to 2.1 percent in January from 1.8 percent in December due to higher food and services costs.

EU harmonized inflation accelerated to 2.1 percent from 2.0 percent in the prior month, matching the earlier estimate published on January 30.

While the U.K.’s FTSE 100 Index is up by 0.3 percent, the German DAX Index is up by 0.1 percent and the French CAC 40 Index is just above the unchanged line.

Pharma major GSK has shown a strong move to the upside in London after launching a £2 billion share buyback program.

BHP has also advanced after the mining and metals company posted earnings at the upper end of analyst expectations.

Meanwhile, copper mining giant Antofagasta has tumbled despite delivering record full-year earnings.

Swiss bio-pharma company Basilea Pharmaceutica has also sliumped after reporting a decrease in full-year earnings.

U.S. Economic News

The Federal Reserve Bank of New York released a report on Tuesday showing a modest increase in regional manufacturing activity in the month of February.

The New York Fed said its general business conditions index edged down to 7.1 in February from 7.7 in January, but a positive reading still indicates growth. Economists had expected the index to dip to 6.0.

Looking ahead, the New York Fed said firms continue to be optimistic about the outlook, with the index for future business conditions climbing to 34.7 in February from 30.3 in January.

At 10 am ET, the National Association of Home Builders is scheduled to release its report on homebuilder confidence in the month of February. The housing market index is expected to inch up to 38 in February after dipping to 37 in January.

Federal Reserve Governor Michael Barr is due to speak on “Artificial Intelligence and the Labor Market” before the New York Association for Business Economics at 12:45 pm ET.

At 2:30 pm ET, San Francisco Federal Reserve President Mary Daly is scheduled to speak on AI and the economy and participate in a moderated conversation before an economic forum co-hosted by the Silicon Valley Leadership Group and San Jose State University.