US stock futures fell sharply early Tuesday as investors worried about rising tensions in the Middle East, higher Treasury yields and rising oil prices. These factors are putting fresh pressure on Wall Street before the market opens.
Nasdaq futures were hit the hardest. As of 4:30 a.m. ET, Nasdaq futures were down more than 1%, while S&P 500 futures fell 0.5%. Dow futures dropped 0.2% and Russell 2000 futures declined 0.4%, according to Stocktwits.
Middle East tensions are a major reason behind the market drop. A key Iranian official reportedly said the country had moved to a “fully offensive” military posture after Washington ruled out extending the temporary ceasefire between the US and Iran. Investors are worried that the conflict could become worse. Any fresh military escalation could increase uncertainty for global markets and put more pressure on oil prices.
Oil prices have now risen for three straight sessions. Higher crude prices are a problem for markets because they can increase costs for companies and add to inflation pressure. Rising oil prices are also pushing Treasury yields higher. The 30-year US Treasury yield climbed above 5.3%, according to Stocktwits. Higher yields can make stocks less attractive because investors can earn more from relatively safer government debt.
Wall Street analysts are divided over what comes next. Evercore ISI has a very bullish view and sees the S&P 500 potentially reaching 9,000 within a year. BTIG has a more cautious outlook. The firm warned that the stock market could face a seasonal pullback of nearly 7%.
Billionaire investor Ray Dalio also warned about the market. He said current optimism around AI stocks is starting to look similar to the “bubble” levels seen in 1929 and 2000, according to Stocktwits.
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AI stocks face fresh pressure
Big AI stocks are also facing new risks. Several technology and AI-linked companies were under pressure in premarket trading as investors looked at company-specific news along with the broader market sell-off.
Meta is facing a major legal battle. Meta is set to face a $1.4 trillion federal youth-safety trial in California, according to Stocktwits. The case adds another major risk for the social media giant.
Microsoft is facing a fresh problem in China. Beijing reportedly removed Microsoft Windows from government systems earlier than previously planned because of security concerns, according to Stocktwits.
Nvidia remains in focus ahead of earnings. Investors are watching Nvidia closely before its earnings report next week. Cathie Wood’s ARK also bought Nvidia shares on Monday.
Memory chip stocks were among the biggest losers. SanDisk and Micron Technology each fell about 5% in early premarket trading. Micron is still getting bullish attention despite the drop. CNBC personality Jim Cramer said Monday that Micron could “double again” if there is no slowdown in data-center spending.
Coherent also dropped about 4%. The stock gave back some of the gains it made Monday after investors reacted positively to the company’s thermal-innovation news, according to Stocktwits.
Nebius fell about 2% in early premarket trading. A planning-board vote cleared the way for Nebius to keep expanding its Vineland site and locked in 300 MW of capacity. Nebius is also getting attention as a neocloud stock. A recent Stocktwits poll showed Nebius as the preferred neocloud play over CoreWeave, Applied Digital and IREN.
Gorilla Technology fell about 2%. The stock came under pressure after the SEC said it would not review the company’s registration statement for the resale of $125 million in convertible notes, according to Stocktwits.
Space stocks remain in focus
Space stocks continued to attract investor attention. However, not all space companies were able to avoid the broader market pressure. AST SpaceMobile fell for a third straight session. The drop came even after FCC filings showed that Ligado’s application to use L-band spectrum across 96 hosted AST satellites remains “Pending Review,” according to Stocktwits.
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Rocket Lab received a major contract boost. The company joined the US Space Force’s $981 million NITE-STAR program. Firefly Aerospace also won a NASA contract. The deal is for spacecraft-processing services, giving the company another positive development as space stocks remain in focus.
Tesla and other stocks to watch
Tesla is back in the spotlight. The company could potentially launch its purpose-built Cybercab in Austin as soon as this month. Sellas Life Sciences is also trending. Jefferies disclosed a new stake in the company, while Sellas CEO discussed preparations around its AML program, according to Stocktwits.
Big retailers are entering earnings week. Home Depot is scheduled to report earnings Tuesday. Target and Lowe’s are due to report Wednesday, followed by Walmart and Ross Stores on Thursday. Several other stocks are trending among retail investors. Nike, Klarna Group, Amylyx Pharmaceuticals and Riot Platforms were among the tickers getting attention on Stocktwits at the time of writing.
What investors are watching Tuesday
Economic data could give investors more clues about the US economy. Markets will be watching July housing starts and pending home sales data on Tuesday. Several companies are also reporting earnings. Klarna, Baidu, Pony AI, VNET Group, Toll Brothers, InspireMD and Anavex Life Sciences are among the companies scheduled to report Tuesday.
The biggest pressure on stocks is coming from several factors at once. Rising Middle East tensions, higher oil prices, rising Treasury yields, concerns about inflation and uncertainty around AI stocks are all adding to investor worries before the US market opens.
For now, retail investor sentiment remains relatively positive on major index ETFs. Sentiment for the SPDR S&P 500 ETF (SPY) remained “bullish” on Stocktwits, while sentiment for the Invesco QQQ Trust (QQQ), which tracks the Nasdaq-100, remained “neutral.”
The key question for Wall Street is whether Tuesday’s weakness is just a short-term pullback or the start of a bigger market decline. Investors will closely watch oil prices, Treasury yields, Middle East developments, economic data and company earnings for the next signal.