Dow futures tumble about 250 points ahead of Fed

Dow futures fell about 250 points in early trading as investors faced rising oil prices, the 10-year Treasury yield above 5% and weakness in AI-related stocks ahead of the Federal Reserve meeting. S&P 500 futures slipped roughly 0.5% and Nasdaq 100 futures fell about 0.6%. On Monday the S&P 500 dropped 0.48% and the Nasdaq fell 0.56%, while the PHLX semiconductor index plunged 5.9%.

The Federal Reserve opened a two-day policy meeting Tuesday, with futures markets assigning about a 92% probability to a 25-basis-point increase on Wednesday, the first rate hike since July 2023. Economists at Deutsche Bank and JPMorgan expect additional increases later in the year, keeping attention on Fed Chair Jerome Powell’s remarks after the decision.

The benchmark 10-year Treasury yield climbed to about 5.03%, its highest level since 2007, extending a bond sell-off driven by inflation concerns and expectations for tighter monetary policy. Analysts note higher yields increase the discount applied to future corporate earnings and can shift investor demand toward government securities.

Brent crude traded above $108 a barrel and West Texas Intermediate rose past $103 after attacks on Saudi infrastructure and an outage on the Saudi East-West pipeline tightened supply. The pipeline outage reduces a route that helps bypass the Strait of Hormuz. Energy stocks moved higher in premarket trading, with Halliburton, Occidental Petroleum and Marathon Petroleum among the gainers.

AI-related stocks remained under pressure. Alphabet and Microsoft each fell more than 1% in premarket trading, while Nvidia was little changed. The semiconductor sell-off followed public calls from senior technology figures for slower development of advanced AI systems on safety grounds; analysts at JPMorgan and Jefferies report they have not found clear evidence that spending on AI infrastructure is slowing.

Cryptocurrency weakness added to market volatility. Bitcoin slipped nearly 3% toward $76,800, and crypto-linked equities, including Coinbase, declined more than 4% in premarket trading. Consumer and leisure names moved unevenly, with Dave & Buster’s dropping about 14% after quarterly results that highlighted ongoing pressure for the entertainment chain.

Market strategist Patrick Munnelly warned that “elevated inflation is limiting central banks’ ability to offer investors monetary relief.” Investors are watching the Fed meeting, energy prices and bond yields for signals on inflation and interest-rate direction, while corporate earnings and further volatility in technology and crypto sectors are expected to shape trading through the week.