US stock index futures rose slightly, Wednesday, with bond yields declining and shares of some giant companies and growth stocks rising, ahead of the release of important data on inflation that may affect market expectations regarding the path of interest rates at the Federal Reserve.
Despite the poor performance in September, the S&P 500 and Nasdaq are on track to record quarterly gains for the second consecutive quarter, according to Reuters.
In contrast, the performance of the Dow Jones index, weighted by stock prices, varies. The index, which includes 30 major American companies, is heading for a quarterly decline, and it appears on its way to recording the first monthly decline since March.
Most shares of giant companies and growth stocks rose slightly in pre-market trading on Wednesday, with shares of “Nvidia”, “Alphabet” and “Apple” rising.
On the other hand, shares of chip companies, including AMD and Marvell, fell slightly.
By 05:27 a.m. EST, Dow Jones futures rose 95 points, or 0.18 percent, S&P 500 futures rose eight points, or 0.1 percent, while Nasdaq 100 futures fell 2.25 points, or 0.01 percent.
The reading of the personal consumption expenditures price index for August, which is closely monitored by the Federal Reserve, is expected to show annual inflation rising to 3.7 percent, according to economists polled by Reuters.
Money market data showed that traders were almost equally divided regarding the possibility of raising interest rates in October, after a week ago the markets were pricing in a probability of more than 70 percent of raising them, according to the “Feed Watch” tool of the CME Group.
“The third quarter not only dashed hopes of longer rate cuts, but doused them with scarce diesel fuel and set them on fire,” Michael Ivery, chief global strategist at Rabobank, said in a note.
The final reading of gross domestic product in the second quarter is also scheduled to be released, along with statements from at least four Federal Reserve officials, including Minneapolis Fed Chairman Neel Kashkari, later on Wednesday.
September witnessed sharp fluctuations in bond markets and a rise in crude oil prices due to the ongoing conflict between the United States and Iran. This raised concerns about inflation and negatively affected high-risk assets around the world.
On Wednesday, the yield on 10-year US Treasury bonds fell by 2.9 basis points, after recording in the previous session its highest level since June 2007.
Warnings issued earlier this month by leaders of the largest artificial intelligence companies about the potential existential risks of the technology also sparked turmoil in artificial intelligence stocks, which were the main driver of Wall Street’s rise to record levels this year.
The stock of “Meta Platforms”, the parent company of “Facebook”, was the most prominent gainer this month thanks to the demand for the artificial intelligence agent “Muse” directed to consumers. The stock is on track to achieve gains of approximately 30 percent in September. The stock fell 0.3 percent on Wednesday.
The results of Micron Technology, the memory chip giant, scheduled to be released after the market close, may be the next test for artificial intelligence stocks. Analysts expect the company to record an increase in quarterly revenues more than four times its level a year ago.
Among the most moving stocks at the beginning of trading, Boeing stock rose 2.9 percent after the US Department of Defense announced that the company had been chosen to manufacture the new stealth fighter for the US Navy.
Boeing outperformed its competitor, Northrop Grumman, in the development contract, which is worth $20 billion, while Northrop's shares fell 4.2 percent.
Robinhood Markets shares rose 2.3 percent after the electronic brokerage company announced that it would allow users to trade some American stocks around the clock during weekends.
The Bank of England warned on Wednesday of the increasing risk that interconnected vulnerabilities in the financial system could turn into actual disruptions, highlighting the renewed conflict in Iran and the rise in debt issuance linked to artificial intelligence.
The Financial Policy Committee of the Bank of England said that the rise in oil and gas prices pushed bond yields to levels not recorded since 2008, according to Reuters.
Despite the resilience of the financial system and stock markets so far, the committee warned of the continued risk of a sharp correction in the markets, and maintained the counter-cyclical capital margin at 2 percent, a margin that changes according to the level of financial risk.
The committee said, in the minutes of its quarterly meeting, that “the possibility of the crystallization of interconnected vulnerabilities in the financial system has increased.”
She added, "The renewed conflict and the accompanying rise in prices of oil, gas, and refined products lead to a negative shock on the supply side that may last for a longer period."
The Financial Policy Committee is chaired by the Governor of the Bank of England, Andrew Bailey, and focuses on risks that threaten financial stability.
In an article published in conjunction with the committee's minutes on the risks of artificial intelligence, Bailey expanded his warnings about the risks associated with advanced AI systems, and stressed the need for "rigorous testing of models, both before and after deployment," in preparation for tightening regulation.
“A more formal regulatory framework may emerge over time, but regulation is not, in my view, the place to start,” Bailey wrote. This must be preceded by the process of understanding and testing models and identifying reliable intervention points.”
The “rapid increase” in AI-related debt issuance has also led to increased exposure of capital markets to developments in the sector, the committee said.
In early September, Morgan Stanley estimated that global AI-related debt issuance totaled about $450 billion, double its level in 2025.
Although shares of artificial intelligence and semiconductor companies declined sharply in July, market performance remained orderly, according to the committee. But she warned that valuations were still high, and a larger shock could lead to sharper repricing.
A series of incidents have raised policymakers' concerns about the possibility of AI systems being able to bypass security measures, including an incident in July when an OpenAI system escaped a controlled test environment and was able to hack into the AI company Hacking Face.
The Bank of England said: “These developments reinforce the committee’s assessment that developments in the field of artificial intelligence may increase cyber and operational risks.”
The Bank of England said that it will present more detailed proposals in early 2027 to amend the rules for bank leverage and the rules regulating the British government bond repurchase market, as traders seek to benefit from interest rate movements, while investors turn their holdings of bonds into temporary liquidity.
The Financial Policy Committee said in July that it would ease the impact of the leverage ratio, which requires lenders to maintain a minimum amount of capital against their total assets.
Consultations on these amendments are scheduled to begin early next year, and the Bank of England said that this “makes it more important to continue developing and implementing measures to enhance the resilience of the British government bond repurchase market.”
Deputy Governor Sarah Breeden said in July that “doing nothing is not an option” when it came to regulating the government bond repurchase market, given the continued risk of a decline in bond trading activity during any financial crisis.
The value of net borrowing in the government bond repurchase market is about 200 billion pounds ($270 billion), according to data from the Bank of England, which said that the financial leverage of hedge funds remained high, but stable in recent months.
Last year, the Bank of England put forward preliminary proposals to tighten the rules, after it was forced to intervene in 2020 and 2022, following the beginning of the “Covid-19” pandemic and after the “mini-budget” proposed by former Prime Minister Liz Truss.
But these proposals faced objections from the financial services sector, and Breeden said that some reforms, such as increasing reliance on central clearing, “may take years, not months.”
