Nasdaq futures inched 0.1% higher, with a near 4% jump in chipmaker Intel (INTC.O) during premarket trading following bumper results. Tech stocks have been under pressure this week as investors grow increasingly uneasy about multi-billion-dollar spending on AI that has yet to yield conclusive evidence of paying off.
Brent crude slipped 3% to $97.69 a barrel, after surging 7% overnight to a two-month high of $102. Attacks by Iran-aligned Houthis on Saudi tankers in the Red Sea risk choking off a second crucial Middle East artery for global oil supplies, alongside Iran's near-closure of the Strait of Hormuz.
President Donald Trump threatened "major military punishment" for Iran and its Houthi allies, while the U.S. military conducted a 13th consecutive night of attacks.
"The dollar has been going up for a few days so clearly the risk has been building and the fact that oil has been at these higher levels for several days has really started to work through the cross-asset correlation," said Shaniel Ramjee, co-head of multi-asset investment at Pictet Asset Management in London.
Most major currencies were steady against the dollar on Friday, though the dollar index was on pace for its biggest weekly jump in about a month, driven in large part by growing expectations for the Federal Reserve to raise interest rates.
Markets show traders believe central banks are more likely to raise borrowing costs, with a one-in-three chance of a rate hike from the Fed as soon as next week - a sea change from merely a week ago - while a move in September is more than fully priced in.
The European Central Bank left rates unchanged on Thursday, but a September rate hike is about 70% priced in. Data on Friday offered a more optimistic economic outlook, after surveys of business activity showed Germany's private sector returned to growth in July for the first time in four months and contraction in France's private sector eased this month.
Global tech stocks took a hit earlier this week after Alphabet (GOOGL.O) and Tesla (TSLA.O), the first two of the so-called "Magnificent Seven" megacap tech companies to report this season, spooked investors as both burned through cash in their most recent quarter on their big spending on AI infrastructure.
"Valuations in U.S. equities are basically off the roof despite very little cash flow generated by tech and the highest beta part of the market. In general, this is a market where there are (some) bubbly signs," said Gabriele Foà, global credit portfolio manager at Algebris Investments in Milan.
"Valuations in U.S. equities are basically off the roof despite very little cash flow generated by tech and the highest beta part of the market. In general, this is a market where there are (some) bubbly signs," said Gabriele Foà, global credit portfolio manager at Algebris Investments in Milan.
DOLLAR SET FOR STRONG WEEKLY GAINS ON RATE OUTLOOK
In bond markets, the benchmark 10-year U.S. yield hit a more than 18-month high of 4.7135%, having climbed 14 basis points this week. The yield on 30-year bonds was steady at 5.1606%, not far from a 19-year peak of 5.201%.
The yen was pinned near 40-year lows at 163.77 per dollar, drawing warnings from the U.S. Treasury about excess volatility in the currency and from Japan's finance minister.
Precious metals edged higher in choppy trading, with gold up 0.3% at $4,060.7 an ounce after falling 2% the day before, while silver advanced 1.2% after a decline of 3.4% on Thursday.
Reporting by Stella Qiu in Sydney and Shashwat Chauhan in Bengaluru; Editing by Sonali Paul, Lincoln Feast, Amanda Cooper and Mrigank Dhaniwala and Anil D'Silva
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