S&P 500 and Dow futures were steady on Thursday after this week's record-breaking rally as investors awaited details on a Middle East peace deal, while Nasdaq futures slipped as strong forecasts from Western Digital and Sandisk failed to impress.
Data storage company Western Digital (WDC.O) lost 15.5% and memory chip maker Sandisk (SNDK.O) dropped 10.1% in premarket trading, after having shot up 200% and 400% this year. Both companies forecast quarterly revenue above expectations, betting on strong AI-driven demand.
"Expectations (for Western Digital) got priced for outright acceleration (not just continued strength)," said Luke Lango, chief technology analyst at financial research firm InvestorPlace.
"When the growth and margin trajectory came in 'merely' excellent rather than re-accelerating, an extremely crowded, high-momentum stock got dumped alongside the broader AI-memory complex that's been unwinding all week."
Shares of other chip stocks such as Micron (MU.O) shed 4.6%, while Advanced Micro Devices (AMD.O), Marvell Technology (MRVL.O) and Intel (INTC.O) lost over 1% each.
Software stocks were also broadly lower, with Atlassian (TEAM.O), Salesforce (CRM.N), Adobe (ADBE.O) and Zscaler (ZS.O) all down sharply following earnings reports from a few companies in the sector.
AppLovin (APP.O) dropped 18.7% as the marketing platform missed Wall Street estimates for quarterly revenue, while cloud security firm Datadog (DDOG.O) lost 22.3% after reporting second-quarter results.
Megacaps such as Meta (META.O) and Amazon (AMZN.O) were marginally higher, while Alphabet (GOOGL.O) was up about 0.5%, a day after dropping 4% on an announcement about a leadership overhaul of its AI division. Apple (AAPL.O) rose 0.8%.
Strong earnings from tech leaders this reporting season have restored investor confidence that AI investments were being monetized, which helped the benchmark S&P 500 (.SPX) and the blue-chip Dow (.DJI) reclaim record highs earlier this week.
At 7:05 a.m. ET, Dow E-minis were up 124 points, or 0.23%, S&P 500 E-minis were up 4.5 points, or 0.06%, and Nasdaq 100 E-minis were down 225.25 points, or 0.76%.
Brent crude prices traded in a tight range near $80 a barrel as markets were keen on any signs of a deal between Iran and the U.S. A proposed deal between Iran and Oman would give Tehran control over ships entering the Gulf through the Strait of Hormuz, sources told Reuters.
The Federal Reserve has been keen on the outlook for energy costs, with most central bankers voicing that they were prepared to act if price pressures increase. St. Louis Fed President Alberto Musalem is expected to speak on monetary policy later in the day.
With Chairman Kevin Warsh staying mum on forward guidance, traders are struggling to gauge the central bank's next policy move.
Probabilities for no change versus a rate hike in September are now closer to even, the CME FedWatch Tool showed. Last week, traders were pricing in a 37% chance for rates staying unchanged versus 63% for a rate increase.
A weekly jobless claims report is due later in the day, heading into the non-farm payrolls figures for July due on Friday.
Among other stocks, Moderna (MRNA.O) rose 3.9% after the U.S. Food and Drug Administration approved the company's flu vaccine for people aged 50 and older.
