US STOCKS-Nasdaq futures fall 2% on tech worries, Fed hike bets

Wall Street futures declined, with the Nasdaq falling 2%, as concerns over rate hikes and AI spending weighed on investor sentiment, amid a global market selloff.

Contracts ‌tracking ​the tech-heavy Nasdaq fell 2%, leading declines among Wall Street futures on Tuesday, as concerns around imminent rate hikes in the United States and debt-backed corporate spending on AI weighed on investor sentiment.

Stocks across ‌the globe, including those in Europe and Asia, came under pressure following a selloff on Wall Street in the previous session, while crude oil and precious metals also fell. The weakness in U.S. artificial intelligence-related stocks is likely to persist as investors worry about ballooning valuations at a ‌time when elevated borrowing costs could make AI spending more costly.

At 03:33 a.m. ET, Dow E-minis were down 372 points, or 0.71%, ‌S&P 500 E-minis were down 101.25 points, or 1.34%, Nasdaq 100 E-minis were down 693.25 points, or 2.25%. Traders expect the Federal Reserve to hike borrowing costs by a total of 50 basis points by December, according to the CME Group's FedWatch Tool, up from one 25 basis point hike two weeks ago, as investors price ⁠in hawkish ​monetary policy under new Chair Kevin Warsh.

The ⁠yield on the short-term 2-year Treasury note slipped about 4 bps to 4.19%, after touching a four-month high on Monday. Investors have been concerned about elevated valuations of AI-related ⁠stocks following a strong rally earlier this quarter in the aftermath of the Middle East ceasefire.

Chip stocks advanced on Monday, with the Philadelphia SE Semiconductor ​Index hitting a record high. Micron's results on Wednesday could offer some clues into the outlook for memory and AI chips. Elon ⁠Musk's SpaceX was the latest megacap to turn to the bond market, following a blockbuster IPO earlier this month, despite logging net losses the year before. The stock lost ⁠16% ​on Monday, while shares of Alphabet, Meta , Microsoft and Amazon.com also fell sharply.

Investors are keeping a wary eye on developments in the Middle East after the U.S. waived sanctions on Iran for 60 days after the first round of talks under a nascent ⁠peace deal, with President Donald Trump saying he will "do what I have to do" if Iran does not stick to its side of ⁠the agreement. Later in the day, ⁠focus will be on a batch of private surveys on business activity for the month of June, ahead of the crucial Fed-preferred inflation report - the Personal Consumption Expenditures Index - due on Friday. Economists expect the price ‌index to touch ‌4.1%, more than twice the central bank's target.