U.S. stocks set for weaker open as technology shares and oil prices weigh on sentiment: Dow Jones, S&P, Nasdaq, Wall Street Futures

U.S. stock index futures pointed to a lower start on Thursday, suggesting Wall Street could surrender part of the gains recorded over the previous two trading sessions as investors reacted to weakness in technology stocks and renewed geopolitical tensions.

Nasdaq 100 futures led the declines, falling 1.1% in premarket trading as semiconductor stocks came under pressure.

TSMC weighs on technology sector

One of the biggest drags on sentiment was Taiwan Semiconductor (NYSE:TSM), whose U.S.-listed shares dropped 4.4% before the opening bell.

Although the chipmaker reported second-quarter results that exceeded expectations, investors reacted negatively to its plans for higher capital spending.

“While the case for boosting capacity is clear at a time when there is a large gap between supply and demand, shareholders will want TSMC to retain some discipline even as it looks to meet orders piling up,” said AJ Bell head of markets Dan Coatsworth.

Rising oil prices add to market caution

Higher crude prices also contributed to the cautious mood after U.S. benchmark oil futures climbed back above $80 a barrel.

Oil rallied following fresh U.S. military strikes on multiple targets across Iran overnight, with Tehran responding by launching new attacks on U.S. military bases in neighbouring Gulf states.

Iran also warned it would target “all the infrastructure in the region” if President Donald Trump follows through on threats to strike Iranian power plants and bridges.

Wall Street closed higher on Wednesday

Despite losing early momentum, U.S. equities finished Wednesday’s session in positive territory.

The Nasdaq gained 162.22 points, or 0.6%, to close at 26,269.23, while the S&P 500 rose 28.81 points, or 0.4%, to 7,527.40. The Dow Jones Industrial Average added 150.37 points, or 0.3%, ending the session at 52,658.64.

Softer inflation data supports rate expectations

Wednesday’s gains were supported by fresh inflation figures showing producer prices declined more than expected in June.

The U.S. Labor Department reported that its Producer Price Index for final demand fell 0.3% during the month after an upwardly revised 0.6% increase in May.

Economists had expected a smaller decline of 0.1%.

Annual producer price inflation also eased to 5.5% from a revised 6.0%, below forecasts of 6.2%.

Combined with softer consumer inflation data released earlier in the week, the figures reinforced expectations that the Federal Reserve will avoid raising interest rates in the near term.

“Traders are rapidly retreating from rate-hike bets,” FHN Financial Chief Economist Chris Low. “Fed funds futures see the odds of a hike this month now at 9% and have a hike fully priced in by December. Yesterday, it was September.”

Sector performance remains mixed

Despite the encouraging inflation data, investor appetite remained restrained as markets monitored developments in the Middle East.

In an interview with Fox News, President Donald Trump warned that the United States could target Iran’s power plants and bridges next week “unless they get to the table and negotiate.”

Brokerage firms were among Wednesday’s strongest performers, with the NYSE Arca Broker/Dealer Index climbing 2.1% to a record closing high.

Airline shares also advanced, with the NYSE Arca Airline Index gaining 1.6%, while software, banking and retail stocks finished higher.

By contrast, computer hardware, networking and semiconductor shares underperformed the broader market.

Taiwan Semiconductor stock price