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Futures Steady After AI-Fueled Rally as Markets Eye Fed and Inflation Data

On Tuesday evening, U.S. stock index futures settled into a calm groove after an AI-driven rally sent Wall Street to fresh heights. All eyes turned to the Federal Reserve and upcoming inflation data. The buzz around AI kept the market buoyant, particularly after Apple (NASDAQ: AAPL) announced a partnership with ChatGPT creator OpenAI to launch new AI features. This excitement spilled into aftermarket trading as Oracle (NYSE: ORCL) unveiled new partnerships with Microsoft (NASDAQ: MSFT), OpenAI, and Alphabet’s Google (NASDAQ: GOOGL) to boost cloud capacity for AI.

However, broader gains were tempered by the anticipation of more guidance on U.S. interest rates later on Wednesday. S&P 500 Futures edged up 0.1% to 5,386.50 points, Nasdaq 100 Futures also nudged up 0.1% to 19,265.75 points, and Dow Jones Futures steadied at 38,788.0 points by 19:14 ET (23:14 GMT).

The market’s spotlight is firmly on the conclusion of a two-day Fed meeting on Wednesday, with expectations high that the central bank will keep interest rates steady. Some optimism lingered around the possibility of the Fed hinting at future rate cuts, especially after the European Central Bank started trimming rates earlier in June. Nonetheless, the consensus is that the Fed will likely wait until September to cut rates, given the robust U.S. labor market and resilient inflation expectations.

Before the rate decision, the May consumer price index data, due on Wednesday, is expected to provide more insights into inflation. The data is likely to show that inflation remained stubbornly high in May, well above the Fed’s 2% annual target, reducing the likelihood of immediate rate cuts. Persistently high inflation keeps the prospect of prolonged high U.S. rates in play, presenting a cautious outlook for the stock markets.

The S&P 500 and Nasdaq Composite reached record highs on Tuesday, driven by relentless AI enthusiasm. Apple soared over 7% to a record high with its new AI features announcement, while Microsoft and Alphabet each gained about 1%. The S&P 500 climbed 0.3% to close at 5,375.32 points, and the Nasdaq Composite jumped 0.9% to 17,343.84 points. Meanwhile, the more economically sensitive Dow Jones Industrial Average lagged, dipping 0.3% to 38,747.42 points. Despite the gains in tech stocks, they did not carry over into aftermarket trading, although Oracle surged nearly 9% after the bell on its new AI collaborations, overshadowing its disappointing quarterly earnings.

Shari Redstone Shuts Down Paramount-Skydance Deal, Eyeing New Buyers

Media heiress Shari Redstone abruptly pulled the plug on talks with David Ellison’s Skydance Media on Tuesday, effectively nixing the potential sale of a controlling stake in Paramount Global to the independent studio, insiders revealed.

Redstone, Paramount’s largest shareholder, made her move just as an agreement seemed imminent. A special committee of Paramount’s board was poised to discuss the deal when they were blindsided by the news that Redstone had called it off.

The daughter of the late media mogul Sumner Redstone, Shari had been expected to offload her family’s stake to Ellison as part of a $2.25 billion transaction for National Amusements, the family’s holding company. This deal was a piece of a larger $8 billion puzzle that would have merged the storied Hollywood giant, Paramount, with the smaller Skydance. Despite agreeing on the financial terms, National Amusements stated it “could not come to agreement” with Skydance on other, unspecified issues. The Wall Street Journal, citing knowledgeable sources, first reported the collapse and suggested that Redstone might now pursue selling National Amusements without merging Paramount.

National Amusements, which owns theaters in the U.S., Britain, and Latin America, holds 77% of Paramount’s class A voting stock. Two other potential buyers, independent producer Steven Paul and Seagram heir Edgar Bronfman (backed by Bain Capital), are now eyeing the stake, giving Redstone the tantalizing prospect of a bidding war, according to an insider.

The Skydance negotiations, which had dragged on for more than six months, reportedly hit a snag over issues beyond economic terms. Talks continued through the weekend to iron out concerns like Redstone’s demand for indemnity against any lawsuits stemming from the deal. The negotiations stalled over another of Redstone’s conditions—that the majority of Paramount’s non-family shareholders endorse the merger.

Another source close to the negotiations claimed Redstone soured on the deal after Ellison’s team reduced their offer for her Paramount holdings. The sale of National Amusements’ controlling stake would have been crucial for a second transaction, where Paramount would acquire Skydance in an all-stock deal.

Ah, Wednesday, the investor’s midweek muse! It’s that quirky little day when the market’s pendulum swings with just enough sass to make you second-guess your Monday convictions but still leaves room to hedge before the Friday frenzy. Picture it: the boardrooms are buzzing with the aroma of optimism, the coffee stronger than yesterday’s resolve, and portfolios getting a midweek makeover. It’s the perfect time to catch those undervalued gems before the weekend warriors swoop in. So, don your Wednesday wisdom, sprinkle a dash of savvy on your stocks, and remember: hump day is for the brave and the bold, where fortunes favor the witty.