Global technology stocks are under pressure due to a sell-off in South Korean chipmakers, while oil prices and bond yields have climbed following a fresh round of attacks in the Middle East over the weekend.
As of 7:39 a.m. New York time, S&P 500 futures are down 0.3%, Nasdaq 100 futures have fallen 0.8%, and Dow futures are largely flat. Market concerns that the artificial intelligence boom may have become overextended are weighing on sentiment, with SK Hynix Inc and Samsung Electronics Co Ltd tumbling in Seoul. US chip stocks, including Micron Technology Inc, are also declining in pre-market trading.
South Korea's Kospi index, driven by chip stocks, has been a standout performer this year and is now increasingly influencing market sentiment around the AI trade. The rally has grown more volatile in recent weeks, with investors questioning whether the spending by AI hyperscale cloud providers can generate returns strong enough to justify continued investment.
Helen Jewell, Chief Investment Officer for Fundamental Equities International at BlackRock, commented, "The market had almost assumed that the Middle East situation was over, and therefore moved to a risk-on stance. It's clear now that that's not the case, so you're seeing more risk-off sentiment."
This week, a host of catalysts could determine the market's direction. Federal Reserve Chair Kevin Warsh is scheduled to make his first congressional testimony on Tuesday. Prior to that, the US Bureau of Labor Statistics will release June's Consumer Price Index data.
Tuesday will also see a series of major Wall Street banks report earnings, followed by chip equipment maker ASML Holding NV releasing its results the next day.
Joachim Klement, Head of Strategy at Panmure Liberum, stated, "The market will see choppy sideways movement this week before the rally can accelerate again. However, we remain cautious on the AI trade, as it is still clearly in overbought territory."
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