US stock futures fell sharply on Thursday, with the Dow Jones Industrial Average futures dropping 480 points, or 0.94%, as a fresh surge in oil prices and persistently high Treasury yields weighed on investor sentiment. S&P 500 futures declined 0.57%, while Nasdaq 100 futures lost about 0.83%.
The pullback follows Wednesday's retreat from record highs, as market participants began to question whether robust AI-driven earnings can continue to offset the drag from rising borrowing costs. Brent crude traded above $104 a barrel at one point, and the 10-year Treasury yield remained above 5.3%, putting inflation, interest rates, and expensive technology valuations back in the spotlight.
Oil Jumps Above $104 on Middle East Supply Risks
Oil prices climbed about 4% on Thursday, with Brent crude surpassing $104 a barrel and West Texas Intermediate approaching $92. Escalating tensions in the Middle East, including attacks on tankers and Saudi infrastructure, along with renewed concerns involving Iran, have heightened fears of supply disruptions. The threat of further instability around the Strait of Hormuz, a key oil transit chokepoint, added to the upward pressure. Additionally, a storm in the Gulf of Mexico forced Shell and Chevron to halt some production, further tightening supply expectations.
Treasury Yields Stay Above 5% as Fed Official Signals More Hikes
Bond yields remain a major obstacle for equities. The 10-year Treasury yield held above 5.3%, while the 30-year yield stayed above 5.7%, making government bonds increasingly competitive with stocks and putting particular pressure on high-valuation technology shares. Federal Reserve Governor Christopher Waller said Thursday that additional interest-rate increases would likely be needed to bring inflation back to target, although policymakers have flexibility in the pace of moves. His comments reinforced expectations that the Fed may not be done tightening.
TSMC Posts Strong Quarter but Chip Stocks Slip
Despite a solid earnings report from TSMC, semiconductor stocks struggled in premarket trading. TSMC reported third-quarter revenue of NT$1.49 trillion (approximately $46.7 billion), up 50% year-over-year and above analyst estimates of around NT$1.46 trillion. September sales jumped roughly 55%, signaling that demand for advanced processors used by Nvidia, AMD, and other AI companies remains exceptionally strong. However, Intel fell about 2% in early trading, and other chip names also came under pressure, reflecting broader market concerns.
Amazon Announces More Job Cuts
Amazon confirmed another round of layoffs affecting fewer than 1,000 white-collar employees, primarily within its Stores business. Workers in the US, India, and the UK were impacted, with reductions hitting areas including customer service and selling-partner operations. The timing is notable because the cuts came during Amazon's Prime Big Deal Days promotion, following a larger restructuring that eliminated roughly 30,000 positions between last year and January.
PepsiCo Lowers Profit Growth Outlook
PepsiCo reported better-than-expected third-quarter results but trimmed its full-year profit-growth forecast. Revenue rose 5.6% to $25.27 billion, beating Wall Street forecasts, while adjusted earnings also topped expectations. However, weakness in North America and higher input costs prompted the company to cut its core earnings-growth guidance. PepsiCo shares were modestly higher in premarket trading following the results.
Investors are now bracing for further volatility as they weigh the impact of higher oil prices, sticky inflation, and the possibility of additional Fed rate hikes on corporate earnings and economic growth.
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