US Stock Futures Slip on Mounting Energy Shock, AI Bubble Fears

US stock futures fell on Thursday morning as investors grew concerned about inflation and rising oil prices. At the same time, they were also watching the new US corporate earnings season. The market was caught between optimism over company earnings and new worries about inflation. Dow Jones futures fell by 0.9% in premarket trading, while S&P 500 futures dropped 0.5% and Nasdaq-100 futures declined by 0.7%, according to Yahoo Finance.

The market's drop followed a loss from record highs on Wednesday. Investors are now assessing whether the market can recover or if higher inflation and borrowing costs will exert more pressure on stocks. Oil prices are exacerbating inflation concerns, with crude prices rising on Thursday as investors remained worried about oil supplies from the Middle East, particularly after attacks on shipping in the Gulf and the Strait of Hormuz.

The Strait of Hormuz is crucial for global energy markets, as about 20% of global oil and fuel supplies passed through it before the war. Shipping attacks in the region have surged in October, with the highest level since the Iran war began, according to Reuters. The attacks create more risks and higher costs for oil shipments, pushing crude oil prices higher.

Higher oil prices can increase inflation, as energy is a major cost for businesses and consumers. This concerns investors and the Federal Reserve, which raised interest rates at its September meeting due to persistent inflation. Fed Governor Chris Waller's upcoming speech in Turkey on Thursday could provide more insight into the Fed's stance on inflation and interest rates.

High US Treasury yields, at around 5.28% for the 10-year and 5.66% for the 30-year, also add pressure to financial markets by making stocks less attractive and increasing borrowing costs. The bond market is experiencing a significant sell-off, with global bond yields remaining near multidecade highs. Investors are now focusing on the third-quarter US earnings season, with companies beginning to report their latest financial results.

PepsiCo, for example, beat expectations for the third quarter but lowered its earnings growth forecast to 2.5% to 3% in fiscal 2026, down from its previous forecast of 5% to 7%. Despite beating expectations, PepsiCo still expects net revenue to increase by about 6%. The broader earnings outlook remains positive, with FactSet estimates suggesting S&P 500 companies could report 29.5% earnings growth in the third quarter, the third straight quarter of more than 25% earnings growth.

However, strong earnings are now competing with concerns about inflation and interest rates, creating a tug-of-war in the stock market. Investors are also waiting for US jobs data on Thursday, which could offer clues about the health of the US economy.