Wall Street futures slide as rate hike bets and AI spending concerns hit tech sentiment

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Wall Street futures slide on tech, AI concerns

Highlights

Nasdaq 100 E-minis fall 2.25% and S&P 500 E-minis drop 1.34% as investors price in 50 basis points of Fed rate hikes by December.
Global AI-related shares face selling pressure as investors question sustainability of debt-financed technology spending amid higher borrowing costs and stretched valuations.
SpaceX stock plunges 16% after recent IPO despite bond market activity, while Alphabet, Meta, Microsoft, and Amazon.com also decline sharply amid broader tech selloff.

Futures retreat before inflation and business activity data

As reported by Reuters, contracts tied to the Nasdaq are falling 2%, leading losses among Wall Street futures as investors brace for imminent U.S. rate increases and question whether debt-backed corporate spending on artificial intelligence remains sustainable.

At 03:33 a.m. ET, Dow E-minis are down 372 points, or 0.71%, S&P 500 E-minis are down 101.25 points, or 1.34%, and Nasdaq 100 E-minis are down 693.25 points, or 2.25%. Traders expect the Federal Reserve to raise borrowing costs by a total of 50 basis points by December, according to CME Group's FedWatch Tool, up from expectations for one 25 basis point increase two weeks ago, as markets price in a more hawkish policy stance under new Chair Kevin Warsh.

The yield on the two-year Treasury note slips about 4 basis points to 4.19% after touching a four-month high on Monday. Later in the day, investor attention turns to private June business activity surveys ahead of Friday's Personal Consumption Expenditures Index report, the Fed's preferred inflation gauge, which economists expect at 4.1%, more than twice the central bank's target.

AI valuation concerns spread across global markets

Stocks in Europe and Asia are also under pressure after the previous Wall Street selloff, while crude oil and precious metals fall as broader risk appetite weakens. The pressure on U.S. AI-linked shares is likely to persist as investors worry that stretched valuations are becoming harder to justify when elevated borrowing costs make large technology investments more expensive.

Investors have been uneasy about AI-related stock valuations after a strong rally earlier this quarter following the Middle East ceasefire. Although chip stocks advanced on Monday and the Philadelphia SE Semiconductor Index reached a record high, markets are watching Micron's results on Wednesday for fresh signals on demand for memory and AI chips.

SpaceX, controlled by Elon Musk, is the latest megacap company to tap the bond market after its blockbuster IPO earlier this month despite reporting net losses the year before. The stock loses 16% on Monday, while shares of Alphabet, Meta, Microsoft and Amazon.com also fall sharply. Investors are also monitoring the Middle East after the U.S. waives sanctions on Iran for 60 days following the first round of talks under a new peace deal, with President Donald Trump saying he will "do what I have to do" if Iran does not honor the agreement.

Our earlier article on Fed Chair Kevin Warsh’s upcoming congressional testimony covered his first scheduled appearance on monetary policy before the House Financial Services Committee on July 14. It also noted the legal requirement for semiannual Fed testimony and described the broader July 2026 hearing agenda, including sessions on fintech, digital assets, consumer regulation and oversight priorities.

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