Equity futures and global markets are lower, ending a modest rebound in US stocks as concerns about a possible war with US and simmering angst over AI dent the fragile optimism seen on Wednesday. Oil extended its rally after its best day since 2021. Tech and small caps underperform which to JPMorgan's market intel desk"feels more like profit-taking and position squaring as US / Iran tensions spike with Trump saying a deal is preferred but that a strike may occur as soon as this weekend."As of 8:00am ET, S&P futures are down 0.2%, erasing an overnight gain, while Nasdaq futures drop 0.3%, with premarket weakness across all sectors ex-Energy and Aerospace/Def and tech came under renewed pressure; most Mag 7 members dropped in premarket trading. Futures dropped after the head of the UN nuclear watchdog warned that Iran’s window for diplomacy is at risk of closing. As for AI, IG’s chief market analyst Alexandre Baradez says there “seems to be no long-short strategy at play,” with hyperscaler capex and disruption to software firms both causing concern. WTI crude continues to rise and is trading at $66 after it added $2.86 /+4.6% yesterday, its strongest day since 2021. At some point Trump will have to decide if he wants war with Iran or risk soaring gas prices into the midterms. Treasuries extended their slide, pushing yields higher by 1-2bps, while the dollar was flat. Gold erased an advance above $5,000 an ounce. Today’s macro data focus is on Jobless data and the Leading Index

In premarket trading, Mag 7 stocks are mostly lower (Microsoft +0.3%, Amazon -0.2%, Alphabet -0.2%, Nvidia -0.2%, Apple -0.4%, Meta Platforms -0.5%, Tesla -0.6%)

In corporate news, OpenAI is said to be close to securing the first phase of funding likely to bring in more than $100 billion. Samsung is looking to price its latest AI HBM4 chip up to 30% higher than the previous generation, according to local media. The CEO of Google DeepMind warned about AI risks and called for global cooperation.

What started off a solid overnight session promptly reversed just around the time Europe opened when futures tumbled into the red after the head of the United Nations nuclear watchdog warned that Iran’s window for a diplomatic deal on its atomic program is closing. Brent rose above $71 a barrel, while West Texas Intermediate was near $66. The risk of conflict in the Middle East has emerged as a new worry for traders after technology stocks drove sharp swings in recent weeks.

Brent rose above $71 a barrel, while West Texas Intermediate was near $66. Inflation concerns are already at the forefront of investors’ minds after minutes of the Federal Reserve’s January policy meeting showed several officials suggested that the central bank may need to raise rates if price growth remains stubbornly high.

Investors also remain wary of further slowing in the S&P 500’s strongest driver of the past three years, amid concerns that AI could disrupt entire sectors and that heavy capital spending wouldn’t pay off.

"What’s really interesting is that there seems to be no long-short strategy at play,” said Alexandre Baradez, chief market analyst at IG in Paris. “This will continue at least until the next earnings season when we’ll get more insight. In the meantime, all eyes will be on Nvidia’s results next week.”

Indeed, doubts about Big Tech are playing out across the market. As we first showed here yesterday, Morgan Stanley's analysis of 13F filings showsmega-cap tech stocks finished the year the most under-owned relative to their weightings in the S&P 500 in 17 years.

And Goldman Sachs data shows 57% of large-cap mutual funds outperforming their benchmarks year-to-date, the highest share since 2007, with rotation in the equity market leading to a broadening in returns.

Simmering geopolitical risks and still-elevated tech valuations could fuel further rotation out of megacaps and into defensive sectors, said Craig Cameron, a portfolio manager at Templeton Global Investments. Still, the vast amount of capital expenditure shows that exposure to technology remains vital, he said.

Source: ZeroHedge News