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* Futures up: Dow 0.2%, S&P 500 0.2%, Nasdaq 0.4%
July 20 (Reuters) - U.S. stock index futures rose slightly
on Monday, following last week's chip-stocks-led pullback, as
investors awaited a key slate of earnings that could test Wall
Street's AI-driven rally, while caution prevailed due to
escalating tensions in the Middle East.
The second-quarter earnings season will pick up pace this
week, with reports due from several major companies, including
Alphabet, Tesla, Intel ( INTC ) and IBM ( IBM )
.
Alphabet, one of the "Magnificent Seven" megacap stocks, is
also a major AI hyperscaler, spending billions of dollars on
data centers and related infrastructure.
That surge in AI capital spending has been a major driver
behind this year's market gains, lifting semiconductor stocks
and other companies that are seen as the beneficiaries of the
buildout, and helping the major U.S. indexes hit record highs.
Earnings from Intel ( INTC ) and Texas Instruments ( TXN ) will be
closely watched after a powerful rally in chip stocks gave way
to a sharp reversal.
The Philadelphia SE Semiconductor Index ended Friday
more than 20% below its late-June record high, confirming a
bear-market decline.
"If earnings reports in the coming weeks suggest that we
remain in the spend phase of the AI buildout, investors are
likely to get more impatient, and the sell-off could drag on
over the summer months," said Kathleen Brooks, research director
at XTB.
At 05:18 a.m. ET, Dow E-minis were up 106 points, or
0.2%, and S&P 500 E-minis were up 16.5 points, or 0.22%.
Nasdaq 100 E-minis were up 111.75 points, or 0.39%.
The three main U.S. indexes fell sharply last week,
pressured by a steep pullback in high-flying semiconductor
shares. The declines came even as benign inflation data eased
some fears of a Federal Reserve rate increase later this month,
while major U.S. banks kicked off earnings season on a positive
note.
Markets are pricing in about a 12% chance of a quarter-point
rate hike at the Fed's July meeting and a roughly 53% chance of
another hike in September, according to CME's FedWatch tool.
Investors were closely watching the development in the
U.S.-Israeli war with Iran after a recent escalation in the
nearly five-month-old conflict.
U.S. forces struck Iran for a ninth consecutive day on
Monday, raising concerns over shipping through the Strait of
Hormuz.
The renewed tensions have fueled worries that energy prices
could climb back toward levels seen at the start of the war,
reviving inflation concerns.
Earlier in the day, Brent crude rose above $90 a
barrel for the first time since early June.
"The escalations have also eroded the assumption that the
crisis in the Middle East is over and energy prices would
normalize," Brooks said.
(Reporting by Ragini Mathur in Bengaluru)