Sept 9 (Reuters) – U.S. stock index futures were subdued on Wednesday as oil prices blew past $100 for the first time since July amid an intensifying Middle East conflict, keeping investors cautious ahead of inflation data later this week.
Investors have struggled to look past the U.S.-Iran war — which has dragged into its seventh month and raised the risk of a broader regional conflict — owing to its impact on oil prices and inflation.
Federal Reserve Chair Kevin Warsh’s focus on controlling prices has also led traders to expect an interest rate hike this month. Markets now see a 60.4% chance that rates will be increased by 25 bps when the central bank meets next week, according to data from the CME FedWatch tool.
“Higher oil and rates remain the main risks to equities in the near term. It is well understood now that strategic reserves have been drawn down substantially to cushion oil prices,” wrote Morgan Stanley analysts, led by chief U.S. equity strategist Mike Wilson.
Brent crude futures were last up 2.06% at $99.94 a barrel after breaching the $100 mark earlier in the session.
Gains in tech stocks have helped offset some concerns, as investors spooked by economic risks have sought refuge in the AI theme.
Chipmakers such as Qualcomm, Arm Holdings and Nvidia rose between 0.16% and 1.73% in premarket trading.
Still, concerns about circular deals have kept some investors cautious, as companies at the heart of the AI boom turn to financing each other.
“Investors should expect these deals to eventually support a consistent flow of higher revenue for the parties involved. If not, we believe markets are going to increasingly become exposed to a tangled web of risks that may not be easily untied,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial.
At 5:05 a.m. ET, Dow E-minis were down 84 points, or 0.16%, S&P 500 E-minis were flat and Nasdaq 100 E-minis inched 12 points, or 0.04%, higher.
Investors will also eye the U.S. Treasury’s buyback announcement later in the session, weeks after the department said it would buy more longer-dated bonds to curb the rise in yields.
Such announcements typically feature a list of bonds eligible for buyback. However, “some market participants are looking to this announcement for some confirmation on the size Treasury will buy,” J.P.Morgan analysts wrote in a note.
Any reaction in the bond markets could influence equities, which are typically pressured by elevated yields on risk-free government bonds.
The Consumer Price Index report due on Friday and the Producer Price Index reading on Thursday will also be eyed for clues on the Fed’s rate outlook.
“This week’s CPI report is the most consequential data point before the Fed’s September meeting, the last inflation reading policymakers will see before deciding on rates,” Glenmede strategists wrote.
(Reporting by Niket Nishant in Bengaluru; Editing by Joyjeet Das)
Comments