US stock futures steady amid cooling rate hike fears; Iran tensions persist

U.S. stock index futures steadied on Wednesday evening after soft June inflation prints quelled concerns that the Federal Reserve will hike interest rates soon, although caution over Iran and deep losses in chipmaking stocks still spurred caution.

Futures steadied after a positive session on Wall Street, where a swathe of strong second-quarter earnings helped lift spirits despite persistent geopolitical tensions and growing doubts over bloated artificial intelligence-fueled valuations in the chip sector.

S&P 500 Futures rose 0.1% to 7,622.50 points by 20:06 ET (00:06 GMT). Nasdaq 100 Futures rose 0.1% to 29,721.75 points, while Dow Jones Futures rose 0.1% to 52,939.0 points.

The U.S. and Iran continued to trade strikes on Wednesday evening, while also offering conflicting stances on the Strait of Hormuz. Oil prices remained elevated after rebounding sharply from annual lows over the past week.

Soft PPI, CPI data help ease rate hike fears
Producer price index inflation data for June read softer than expected on Wednesday, coming just a day after consumer price index data showed a similar trend.

The prints helped soothe concerns over an energy-driven bump in inflation, which markets had feared would push the Fed into raising interest rates by as soon as July.

Fed Chair Kevin Warsh in a two-day Congressional testimony signaled a renewed commitment to the central bank’s 2% inflation target, but offered no clear cues on just how the Fed would achieve the target.
Traders were seen paring back their bets on a Fed rate hike in the coming months, CME Fedwatch showed. But signs of AI-driven price pressures still kept markets on edge over inflation remaining sticky in the long term, which could in turn elicit policy tightening by the Fed.

Chipmakers fall past strong ASML earnings; TSMC in focus
Chipmaking stocks were a major drag on Wall Street on Wednesday, as the sector continued to lose ground amid persistent doubts over whether AI-fueled valuations were sustainable in the coming quarters.

Strong earnings from top chipmaking equipment maker ASML Holding NV (AS:ASML) did little to quell said fears, even as the Dutch lithography giant signaled a continued rise in chip demand from the AI industry.

The Philadelphia Semiconductor Index fell more than 2%.

Focus now turns to upcoming second-quarter earnings from TSMC (NYSE:TSM), due on Thursday, for more cues on the AI trade. TSMC is the world’s largest contract chipmaker, and is a key supplier of advanced processors to AI majors like NVIDIA Corporation (NASDAQ:NVDA).

TSMC is expected to post another blowout quarter, although focus will be squarely on the chipmaker’s outlook for the coming months.

Chipmakers faced heavy profit-taking in recent weeks after a stellar AI-fuelled jump in valuations in this year. While AI-driven demand is largely expected to continue, investors have begun questioning whether the sector’s pace of exponential growth can be maintained in the coming quarters.
Losses in chipmakers limited overall gains on Wall Street on Wednesday. The broader technology sector advanced, while other sectors were also cheered by a swathe of strong bank earnings.

The earnings season is expected to continue in earnest on Thursday, with Unitedhealth Group (NYSE:UNH), GE Aerospace (NYSE:GE), Netflix Inc (NASDAQ:NFLX), and Abbott Laboratories (NYSE:ABT) set to report.