US Futures Mixed as AI Spending Fears and Fed Hike Odds Rise

US equity futures traded in a mixed direction Thursday morning as investors weighed concerns over excessive spending in the artificial intelligence sector against a rising probability that the Federal Reserve will increase interest rates. Dow Jones Industrial Average futures were up 0.3%, S&P 500 futures fell 0.4%, and Nasdaq futures dropped 1.4% in premarket trading.

Sentiment in the AI sector was driven lower by a sharp decline in CoreWeave (CRWV) shares, which fell 4.9% premarket after losing 16% at Wednesday's close. According to Trace bond pricing information, the yield on CoreWeave's 9.625% senior unsecured notes due 2032 climbed to over 15% midday Wednesday, up from 13% at the start of the month. CEO Mike Intrator told Bloomberg News that the market's reaction to the drop in the company's stock and bond prices is "irrational."

Macroeconomic data released Thursday further complicated the outlook for monetary policy. The US Bureau of Labor Statistics reported that the consumer price index rose 0.6% in September, matching expectations in a Bloomberg-compiled poll. The CME FedWatch tool indicated that the probability of the Federal Reserve raising its target rate by 25 basis points in October stands at 31.6%, nearly double the 17.7% probability recorded a week earlier.

Other economic indicators showed mixed signals for the US economy. The Producer Price Index increased 1.3% in September following a 0.5% rise in August, outpacing the 0.6% increase expected by Bloomberg survey respondents. Initial jobless claims for the week ended Oct. 10 came in at 199,000, up from 198,000 in the prior week and slightly below the expected 200,000. Retail sales rose 0.8% in September after a 1.3% jump in August, beating forecasts for a 0.3% gain.

Manufacturing activity presented a divergent picture across regions. The Philadelphia Federal Reserve's monthly manufacturing index fell to 20.9 in October from 37.8 in September, though it remained above the expected decline to 28.0. In contrast, the Empire State manufacturing index surged to 25.5 in October from 7.6 in September, significantly exceeding expectations for an increase to 12.0.

Global markets reflected varied performance, with Japan's Nikkei closing down 4.9%, Hong Kong's Hang Seng ending 1% lower, and China's Shanghai Composite finishing 1.6% lower. In Europe, the UK's FTSE 100 was up 0.8% while Germany's DAX index was down 0.3% in early afternoon trading.

Corporate earnings drove specific stock movements ahead of the bell. Taiwan Semiconductor Manufacturing (TSM) shares fell 3.3% despite reporting higher Q3 net income and revenue. Charles Schwab (SCHW) shares dropped 4% even after posting higher adjusted earnings and revenue for Q3, while PNC Financial Services (PNC) stock declined 2% after missing consensus estimates for Q3 revenue.

On the positive side, Eli Lilly (LLY) shares rose 1.8% after Adlai Nortye (ANL) announced clinical trial collaboration and supply agreements with Eli Lilly and Merck KGaA to evaluate its investigational cancer drug AN4035 in combination with cetuximab. AstraZeneca (AZN) stock climbed 3.4% following a partnership with Insitro aimed at creating therapies for fatty liver disease and heart muscle conditions. TotalEnergies (TTE) shares gained 1.2% after the company projected Q3 hydrocarbon production of 2.45 million to 2.50 million barrels of oil equivalent per day, an increase of more than 4% year over year excluding Middle East conflict impacts.

Oil prices moved modestly, with front-month North Sea Brent crude down 1.8% at $104.19 per barrel and US West Texas Intermediate crude up 0.1% at $95.12 per barrel.