By Tharuniyaa Lakshmi and Shashwat Chauhan
Oct 7 (Reuters) - Wall Street's main indexes were set for a lower open on Wednesday as Treasury yields and oil prices rose again, keeping investors cautious as they awaited the minutes of the Federal Reserve's September meeting.
The tech-heavy Nasdaq and the benchmark S&P 500 ended at all-time highs on Tuesday as AI optimism propelled tech stocks higher and investors braced for a solid third-quarter earnings season.
The blue-chip Dow remains about 5% below
its August 5 record closing high.
On Wednesday, however, sentiment turned more cautious as investors reassessed the outlook for interest rates and energy costs. Brent crude was back above the psychologically important $100-a-barrel level as Middle East supply concerns persisted. [O/R]
"We're seeing a little bit of profit-taking today. The market is very focused on the Fed minutes, but ultimately it's where oil prices and yields move that will determine the market's direction today," said Peter Cardillo, chief market economist at Spartan Capital Securities.
The yield on 30-year Treasury bonds rose to the highest since 2002, last at 5.72% ahead of the release later in the day of minutes from the US Federal Reserve's September policy meeting, when policymakers raised interest rates to combat inflation.
"The Fed's latest rate hike is unlikely to slow the rapid build-out of AI infrastructure, where investment remains exceptionally strong," said Emin Hajiyev, senior economist, global macro research at Insight Investment.
"Instead, tighter monetary policy is more likely to weigh on the traditional sectors of the economy that are already showing signs of sensitivity to higher borrowing costs."
The S&P 500's equal-weighted counterpart, meanwhile, stands more than 5% away from record highs and the interest-rate-sensitive Russell 2000 small-cap index is down more than 8% from its all-time high.
Traders widely expect the Fed to hold rates steady at its October meeting, but a December hike remains on the cards, according to the CME FedWatch Tool.
At 8:22 a.m. ET, Dow E-minis were down 411 points, or 0.79%, S&P 500 E-minis were down 34.5 points, or 0.44%, and Nasdaq 100 E-minis were down 243.5 points, or 0.77%.
Chip stocks were among the top decliners in premarket trading. Memory chip firm Micron Technology dropped 2.8%, while AMD, Broadcom and Marvell Technology fell between 1.3% and 2.1%.
Elon Musk's SpaceX lost 1.6% after a Financial Times report that the rockets-to-AI firm was seeking $40 billion in financing to fund purchases of Nvidia chips.
Constellation Brands dropped 3.8% after the Corona beer maker lowered its annual operating margin forecast.
Focus will likely shift to how corporate America is faring as the third-quarter earnings season kicks off next week, with a number of high-profile financial firms expected to report on Tuesday.
Analysts currently expect S&P 500 earnings growth of 30.6%, in aggregate, for the July-to-September period, led by an expected 114.7% jump in energy earnings, followed by a 66.5% estimated surge in tech results, according to LSEG.
While the 30% profit growth is smaller than in the second quarter, when S&P 500 companies posted a 54% jump in earnings, investors expect a largely positive season to underpin record-high stock markets.
Among earnings-driven moves, AI data center infrastructure provider Penguin Solutions jumped 4.3% after hiking its full-year revenue forecast and posting better-than-expected fourth-quarter results.
(Reporting by Tharuniyaa Lakshmi and Shashwat Chauhan in Bengaluru; Editing by Maju Samuel)
