By Jayasree Prabhu
Sept 15 (Reuters) - U.S. stock index futures slipped on Tuesday as higher crude oil prices, elevated Treasury yields and an uncertain outlook for AI demand kept investors at bay.
Several tech stocks sank premarket, with Alphabet and Microsoft down more than 1% each. Chipmakers, which bore the brunt of Monday's selloff, were trading within a narrow range. Nvidia rose marginally.
The latest bout of anxiety was driven by calls from top AI companies to slow the development of the technology,
citing safety concerns.
While there is little clarity so far on how such a slowdown would work, the declines have added to the gloom in markets at a time when above-target inflation and fears of higher borrowing costs have already made the backdrop for equities more fragile.
The Federal Reserve is expected to raise interest rates, with traders pricing in a 92% chance of a hike on Wednesday.
At 04:36 a.m. ET, Dow E-minis fell 341 points, or 0.65%, S&P 500 E-minis dropped 39.75 points, or 0.52%, and Nasdaq 100 E-minis were down 168.25 points, or 0.58%.
"I actually think that this is more likely to be a hiccup than it is to be an end to the AI trade. The AI genie is not going to be put back in the bottle," said Nancy Tengler, CEO of Laffer Tengler Investments.
"I don't think a correction in AI stocks would hurt this market. We've run pretty hard, pretty fast over the last few years."
OIL PRICES WEIGH
Meanwhile, the Middle East conflict has shown few signs of easing, keeping oil prices elevated and deepening concerns of a supply shock.
Brent crude futures rose more than 2% to $108.06, while U.S. West Texas Intermediate futures were trading at $103.76, also up over 2%.
"Energy is doing most of the damage on the inflationary front at present," said Anthony Saglimbene, chief market strategist at Ameriprise Financial.
The yield on the benchmark U.S. 10-year Treasury note hit its highest since 2007, as investors girded for what many suspect will be just the first in a series of rate increases. It was last up 6.76 basis points at 5.0286%.
High yields on risk-free Treasuries dampen the appeal of stocks.
The latest batch of economic data has also given little comfort to investors. The Labor Department's report last week showed consumer prices accelerated in August, while a key measure of underlying inflation posted its largest increase in four months.
"Given current inflation dynamics, a solid employment backdrop, and a new Fed Chair looking to establish credibility, Wednesday's rate decision carries the highest odds of a hike markets have seen all year," Saglimbene said.
"Investors should be prepared for the Committee to act this week, even if there's still a small chance Fed Chair (Kevin) Warsh and company decide to stand pat."
Elsewhere, shares of Dave & Buster's tumbled nearly 14% premarket after second-quarter revenue missed expectations.
Crypto stocks fell after a nearly 3% slide in bitcoin. Coinbase and Strategy dropped more than 4.5% each.
(Reporting by Niket Nishant in Bengaluru; Editing by Mrigank Dhaniwala)
