U.S. Stocks Open Lower as Middle East Conflict Pushes Oil Higher; Markets Await Fed Rate Decision

U.S. stocks opened lower on Wednesday (29th), with the Dow Jones Industrial Average briefly dropping about 400 points. Escalating conflict in the Middle East pushed Brent crude oil close to $90 per barrel, heightening market concerns over inflation and rising bond yields, which dampened risk appetite.

Investors are also awaiting the Federal Reserve’s upcoming interest rate decision. Chip stocks weakened ahead of after-hours earnings reports from Microsoft (MSFT-US) and Meta (META-US), as the market scrutinizes whether their massive AI spending will yield sufficient returns.

At the time of reporting, the Dow Jones Industrial Average was down nearly 420 points, or 0.8%; the Nasdaq Composite Index was down nearly 40 points, or 0.2%; the S&P 500 Index was down nearly 0.1%; and the Philadelphia Semiconductor Index was down nearly 0.3%. TSMC ADR fell nearly 1.3%.

U.S. stock futures were volatile on Wednesday as investors awaited Meta and Microsoft’s earnings and the Fed’s rate decision, with markets not yet fully ruling out a rate hike. A brief ceasefire in the Middle East suddenly collapsed, pushing Brent crude toward $90 per barrel, while U.S. Treasury prices declined.

S&P 500 futures were little changed, while Nasdaq 100 futures fluctuated near flat. Chip stocks have been sold off recently, pushing the Nasdaq 100 Index close to a technical correction zone. Markets currently assign about a 35% probability to a Fed rate hike, while the U.S. dollar index remained largely flat.

Meta and Microsoft are set to release earnings after the close, both being among the world’s largest AI spenders. As the market begins to question whether massive AI infrastructure investments will generate adequate returns, even as Wall Street expects continued strong growth, investors are focusing on whether earnings and guidance can justify the heavy capital expenditures.

Chipmakers are also facing skepticism over their ability to sustain high profit margins. Despite reporting over a fivefold increase in operating profit, South Korea’s SK Hynix saw its stock plunge nearly 10%, extending the semiconductor sector’s sell-off. This downturn has erased over $700 billion in market value from the sector in just over a month.

Fares Hendi, portfolio manager at French asset management firm Société de Gestion Prévior, said he hopes Meta and Microsoft can confirm the continuation of the industry’s capital expenditure boom and restore confidence in semiconductor stocks.

European markets were mixed, with the Stoxx Europe 600 Index fluctuating near flat amid a flurry of earnings reports. Luxury brands showed divergent performance: Gucci’s better-than-expected sales lifted parent company Kering’s shares, while Hermès was pressured by lackluster growth in its China business.

On oil, former U.S. President Trump threatened strong retaliation against Iran in response to attacks on U.S. troops in Jordan, sending Brent crude sharply higher. Earlier, a temporary halt in U.S.-Iran attacks had caused Brent crude to fall 16% over three trading days; renewed hostilities have forced markets to reprice supply disruption risks.

JPMorgan’s market intelligence team believes the most favorable outcome for U.S. stocks would be a Fed rate hold accompanied by dovish signals, potentially lifting the S&P 500 by 0.5% to 1%. However, their base case is a "hawkish hold," where rates are kept steady while the Fed emphasizes continued vigilance on inflation. Market participants warn that if the Fed unexpectedly hikes rates and signals a new tightening cycle, it could severely shock equity markets.

As of Wednesday (29th) around 21:00 Taipei time:

- Dow Jones Industrial Average: Down 408.96 points, or 0.78%, at 52,338.36 - Nasdaq Composite Index: Up 2.36 points, or 0.01%, at 24,879.28 - S&P 500 Index: Down 4.32 points, or 0.06%, at 7,424.46 - Philadelphia Semiconductor Index: Up 53.68 points, or 0.49%, at 11,089.37 - TSMC ADR: Down 0.52% to $390.27 per share - 10-year U.S. Treasury yield: Up to 4.627% - NY Light Crude: Up 6.21% to $84.18 per barrel - Brent Crude: Up 6.37% to $89.45 per barrel - Gold: Down 0.46% to $4,079.60 per ounce - U.S. Dollar Index: Down to 101.41

Key individual stocks:

- Biogen (BIIB-US): Up 3.26% in premarket, at $212.32 per share. The biotech company rose 0.7% premarket after reporting revenue and earnings that beat Wall Street expectations and raising its full-year adjusted EPS forecast. - Procter & Gamble (PG-US): Down 3.58% in premarket, at $143.55 per share. P&G dropped over 3% premarket after reporting fourth-quarter revenue below market expectations. Revenue was $21.2 billion, slightly below the LSEG-compiled analyst estimate of $21.38 billion; net profit fell from $3.62 billion a year earlier to $3.04 billion. - Ford Motor (F-US): Up 3.68% in premarket, at $15.54 per share. Ford surged 6% premarket after reporting second-quarter adjusted earnings above expectations and raising its 2026 full-year earnings outlook. However, automotive revenue was slightly below analyst expectations compiled by LSEG.

Key economic data today:

- None

Wall Street analysis:

JPMorgan stated that the sharp deleveraging in South Korea’s market since mid-June indicates that leveraged ETF unwinding is largely complete, with hedge funds finishing about 90% of their operations, and related ratios returning to more acceptable levels.

The firm’s strategist report noted that South Korean equities now appear attractively positioned, with low valuations and strong earnings momentum. "As the market corrected, the scale of such funds has now dropped to $17 billion," the report said, adding that the rapid inflow into leveraged ETFs has clearly slowed in recent days.