US STOCKS-S&P 500, Dow to open slightly higher on Mideast deal hopes; chip, software stocks tumble

The S&P 500 and Dow were set for a steady open, while Nasdaq futures slipped due to disappointing forecasts from Western Digital and Sandisk despite strong quarterly revenue.

The S&P ‌500 ​and the Dow were set for a steady open on Thursday, building on this week's record rally as investors awaited details on a Middle East peace deal, while Nasdaq futures slipped as strong forecasts from Western Digital and Sandisk failed to impress.

Data storage company Western Digital lost 14.4% ‌and memory chip maker Sandisk dropped 10.4% in premarket trading, after having shot up 200% and 400% this year. Both companies forecast quarterly revenue above expectations, betting on strong AI-driven demand. "Expectations (for Western Digital) got priced for outright acceleration (not just continued strength)," said Luke Lango, chief technology analyst at financial research firm InvestorPlace.

"When the growth and margin trajectory came in 'merely' excellent rather than re-accelerating, an extremely crowded, high-momentum stock got dumped alongside the ‌broader AI-memory complex that's been unwinding all week." Shares of other chip stocks such as Micron shed 4.6%, while Advanced Micro Devices, Marvell Technology and Intel lost over 1% each.

Software stocks were also ‌broadly lower, with Atlassian , Salesforce, Adobe and Zscaler all down sharply following earnings reports from a few companies in the sector. AppLovin dropped 19% as the marketing platform missed Wall Street estimates for quarterly revenue, while cloud security firm Datadog lost 15.6% after reporting second-quarter results.

Megacaps such as Meta and Amazon were marginally higher, while Alphabet dipped 0.3% after a report said the company is looking to raise as much as $25 billion from its latest U.S. bond offering. The stock ended down 4% in ⁠the previous ​session on an announcement about a leadership overhaul of ⁠its AI division. Apple rose 1%. SpaceX rose 2.3% ahead of the space conglomerate's first post-IPO share lockup expiry. The broader AI-linked group of stocks showed signs of cooling from a rally.

Strong earnings from tech leaders this reporting season have restored ⁠investor confidence that AI investments were being monetized, which helped the benchmark S&P 500 and the blue-chip Dow reclaim record highs earlier this week. The Nasdaq is about 3% away from an all-time high, bouncing off last ​week's lows, which saw the index coming close to confirming a correction.

At 8:38 a.m. ET, Dow E-minis were up 125 points, or 0.23%, and S&P 500 E-minis were up 11.5 ⁠points, or 0.15%. Nasdaq 100 E-minis were down 161.5 points, or 0.55%. Brent crude prices traded in a tight range near $80 a barrel as markets were keen on any signs of a deal between Iran and the United States. A proposed deal between ⁠Iran ​and Oman would give Tehran control over ships entering the Gulf through the Strait of Hormuz, sources told Reuters.

The Federal Reserve has been keen on the outlook for energy costs, with most central bankers voicing that they were prepared to act if price pressures increase. St. Louis Fed President Alberto Musalem is expected to speak on monetary policy later in the day. With Fed Chairman Kevin ⁠Warsh staying mum on forward guidance, traders are struggling to gauge the central bank's next policy move.

Probabilities for no change versus a rate hike in September are now closer to even, the ⁠CME FedWatch Tool showed. Last week, traders were pricing ⁠in a 37% chance for rates staying unchanged versus 63% for a rate increase. A Labor Department report showed weekly jobless claims stood at 199,000, missing economists' expectations of 202,000 heading into the nonfarm payrolls figures for July due on Friday.

Among other stocks, Moderna rose 3.9% after the U.S. Food ‌and Drug Administration approved the ‌company's flu vaccine for people aged 50 and older.