Wall Street’s Tuesday setup is no longer just about oil or geopolitics.
Nasdaq futures were pointing to a sharp selloff before the bell as investors questioned whether the AI trade can keep absorbing higher borrowing costs and debt-funded spending.
The pressure followed a global equity slide, with Europe and Asia pulled lower after Monday’s tech-led drop in New York.
Traders are also bracing for US business surveys and Thursday’s PCE inflation report, both of which could sharpen the debate over how far the Federal Reserve may go under Chair Kevin Warsh.
5 things to know before Wall Street opens
1. Nasdaq futures lead the selloff
S&P 500 futures were down 1.33%, while Nasdaq 100 futures dropped 2.42%. Dow futures lost 319 points, or 0.61%.
The move extended Monday’s pressure on megacap shares, suggesting investors are no longer willing to pay any price for AI exposure when borrowing costs are rising and earnings expectations are already stretched.
2. AI spending is facing a tougher funding test
The market is looking more closely at how the AI boom is being financed.
SpaceX’s move into the bond market after its blockbuster listing added to worries that some companies are leaning on debt to support heavy infrastructure spending.
That is a harder sell when interest-rate expectations are moving higher rather than lower. It also shifts attention from revenue growth to balance-sheet resilience.
3. Fed hike bets are back in control
Traders now expect the Fed to raise rates by about 50 basis points by December, according to futures pricing.
That is a sharp shift from expectations earlier this month and reflects the market’s belief that Chair Kevin Warsh will stay focused on inflation.
Two-year Treasury yields eased slightly, but they remain close to recent highs, keeping pressure on long-duration growth stocks.
4. Micron becomes the next AI bellwether
Chip shares had been a bright spot on Monday, with the Philadelphia Semiconductor Index touching a record. That makes Micron’s results on Wednesday especially important.
Investors will look for signs that demand for memory and AI chips is strong enough to justify the sector’s rally, even as valuations look more demanding.
The update could set the tone for the next leg of the semiconductor trade.
5. PMIs and PCE data could reset the tone
Tuesday’s private business surveys will offer a first look at June activity across services and manufacturing.
The bigger test comes with Thursday’s PCE inflation report, the Fed’s preferred price gauge.
A hot print would strengthen the case for higher rates and could deepen the pressure on tech, crypto, gold and other rate-sensitive assets.
A softer reading would give bulls some breathing room, but not much.
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