U.S. stock futures edged lower early Tuesday, reversing some of Monday’s record-setting momentum as rising oil prices and renewed anxiety over the artificial intelligence sector weighed on investor sentiment. The Nasdaq 100 futures declined 0.7%, while S&P 500 futures dropped 0.3%. In contrast, Dow Jones Industrial Average futures managed a 0.3% gain, reflecting a divergence between technology and more traditional sectors.
The pullback comes at a fragile juncture for markets. Both the S&P 500 and the Nasdaq Composite closed at all-time highs on Monday, even as a dense calendar of corporate earnings, key economic data, and the Federal Reserve’s two-day policy meeting loomed. The thin margin for error was underscored by early pre-market moves.
Oil Prices Surge on Geopolitical Tensions
Brent crude climbed to $111.20 a barrel, while U.S. crude hit $99.10, after a U.S. official indicated that President Donald Trump’s administration was not satisfied with Iran’s latest proposal regarding its nuclear program. The impasse continues to restrict tanker traffic through the Strait of Hormuz, a critical chokepoint for global oil shipments. Analysts warn that sustained high energy costs could begin to erode corporate margins and consumer spending if the disruption persists.
AI and Tech Stocks Under Pressure
Pre-market trading was particularly harsh on technology and AI-related names. According to a report from Reuters citing the Wall Street Journal, OpenAI fell short of its internal targets for weekly active users and revenue. This news rippled through the AI ecosystem. Oracle, which has significant cloud exposure to OpenAI, slid 4.6% in pre-market action. Nvidia dropped 1.2%, AMD slipped 3.2%, and Arm Holdings tumbled 6.8%.
“Earnings season has helped markets look through the disruption,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown. However, he cautioned that higher energy costs could “begin to bite” if key oil routes remain restricted. Anthony Saglimbene, chief market strategist at Ameriprise Financial, noted that while stocks have held up, the split between equities and the more cautious moves in oil and bond markets suggests “geopolitical developments remain an active” variable.
Earnings Season Continues
UPS shares fell 3% after the company reported a 28% decline in adjusted quarterly profit, partly due to reducing its reliance on Amazon deliveries while pivoting toward higher-margin healthcare and data center logistics. FedEx has similarly been trimming costs and boosting automation.
General Motors bucked the negative trend, reporting a 22% increase in first-quarter core profit and raising its full-year core profit outlook to a range of $13.5 billion to $15.5 billion. CEO Mary Barra described the current environment as “very dynamic.”
Fed and Big Tech in Focus
The Federal Reserve begins its two-day policy meeting Tuesday, with markets widely expecting policymakers to hold interest rates steady when the decision is announced Wednesday. Investors will scrutinize any commentary on how the ongoing conflict could stoke inflation, as higher oil prices tend to ripple through the economy and reduce the likelihood of rate cuts that would support equities.
Later this week, the spotlight shifts to Big Tech earnings. Microsoft, Alphabet, Amazon, and Meta Platforms are all scheduled to report on Wednesday, followed by Apple on Thursday. Investors are keen to hear details on capital spending plans for AI infrastructure and data centers. Saglimbene noted these giants “have a lot to prove” if their stocks are to push higher.
The market’s near-term direction may hinge less on any single earnings report and more on whether crude prices continue to drive the narrative. Should geopolitical tensions ease, a relief rally could quickly materialize. But as Sid Vaidya, chief investment strategist at TD Wealth, pointed out, the rebound has occurred without a permanent resolution, leaving the door open for renewed volatility.
