US stock index futures fell on Wednesday, led by the technology sector after reports that Washington will issue a new ban on exports of AI-related products to China.
On Tuesday, the Dow Jones Industrial Average DJIA was up 212 points, or 0.63%, to 33927, the S&P 500 SPX was up 50 points, or 1.15%, to 4378, and the Nasdaq Composite COMP was up 220 points, or 1.65% 13556 to .
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Nasdaq futures led early declines after news the Biden administration is considering a new ban on selling AI chips to China.
The decline in the tech-heavy index dampened the latest rally, which came after traders welcomed upbeat US data on Tuesday for durable goods orders, home sales and consumer confidence, analysts noted.
“The rebound was moderated somewhat overnight,” said Jim Reid, a strategist at Deutsche Bank, following the report on the AI chip ban.
“Nvidia, which generates 20% of its sales in China, has been making low-end chips that don’t require an external export license. However, the article suggests that these too could be included in the future. Nvidia and AMD are both down more than 3% in after-hours trading, with AI-related stocks in China falling more,” Reid added.
In the premarket Wednesday, shares of Nvidia NVDA fell 4.8% and Advanced Micro Devices AMD ,
another AI chip maker, fell 3.6%.
Traders will also keep an eye on Sintra in Portugal, where the European Central Bank is holding its annual central banking forum, including a 2:30pm BST (9:30am Eastern Time) panel featuring Jay Powell and the Federal Reserve Chairman, along with the central bank governors of the UK, the eurozone and Japan.
As policymakers continue to battle stubborn inflationary pressures, investors remain wary of the prospect of higher borrowing costs. As such, comments on the subject, particularly from Powell, could weigh on market sentiment.
However, Mark Newton, Fundstrat’s head of technical strategy, believes that recent market action points to further gains.
“Tuesday’s rebound back to multi-day highs looked important and positive as it halted the recent decline. After five days of decline from the last six, SPX [S&P 500] It managed to rebound strongly enough to recoup nearly 50% of the entire decline since the mid-June highs,” Newton wrote in a note.
“As discussed over the past few days, the lack of significant downside range given recent weakness was seen as encouraging and a few days of weakness in large cap tech largely obscured market performance as many sectors performed reasonably well last week. Going forward, I think Tuesday’s strong gains are constructive and should take the SPX back to mid-June test and exceed levels, which could help prices outperform the SPX-4500,” added Newton.
US economic updates due for release on Wednesday include May retail and wholesale expanded inventories, due at 8:30 am ET.