By Niket Nishant and Tharuniyaa Lakshmi
Sept 2 (Reuters) – Wall Street futures slipped on Wednesday, as bond yields and oil prices marched higher following U.S.-Iran clashes in the Middle East, offering little incentive to buy equities during what has typically been a weak month for returns.
The latest strikes have pushed geopolitical tensions front and center, ending the uneasy calm of the past few weeks and reviving inflation concerns.
“If hostilities are going to increase, they are likely to increase within the next couple of weeks. The Iranians have their maximum leverage now before the midterm elections,” said Ryan Isherwood, founder and CEO of Significance Capital.
Any flare-up could complicate the interest-rate outlook further. Over the past week, traders have sharply increased bets on a September rate hike after Federal Reserve Chair Kevin Warsh said taming price pressures is the central bank’s chief focus.
Markets are now pricing in a 68% chance of a hike in September, according to the CME FedWatch tool, compared with about 37% a week ago.
“It’s been a ping-pong match on rate expectations, but we still think a hike right before the election is unlikely,” Isherwood said.
Renewed tensions in the Middle East could push oil prices higher and add to inflationary pressures by raising costs for consumers and businesses.
Such a situation would typically demand rate increases, but the Fed could be in a bind if higher costs also start slowing economic growth, Isherwood added.
At 6:57 a.m. ET, Dow E-minis were down 79 points, or 0.15%, and S&P 500 E-minis were down 19 points, or 0.25%. Nasdaq 100 E-minis were down 152.25 points, or 0.52%.
Equities were also under pressure from elevated yields on risk-free U.S. Treasuries, which reduce the appeal of taking on the added risk of buying stocks.
Investors are contending with seasonal weakness too. Since 1926, the benchmark S&P 500 has lost 0.7% on average in September, making it the weakest month for stocks and the only one with a negative average return, according to Fisher Investments, which cited data from Finaeon.
Major movers in the premarket session included Dell, which gained 8.5% after raising its annual profit and revenue forecast. Hewlett Packard Enterprise also rose 4.5% after Dell’s upbeat outlook boosted sentiment around AI infrastructure spending.
The Magnificent Seven group of stocks inched lower, with Nvidia and Microsoft down 0.3% and 0.8%, respectively, while Alphabet and Tesla fell marginally.
Energy stocks, which have been among the few gainers in recent sessions, rose as Brent crude inched higher. Chevron and Valero Energy each edged 0.4% higher.
Investors will also parse the jobs report on Friday, which could help set the tone for equities. Recent inflation data has offered mixed cues.
(Reporting by Niket Nishant and Tharuniyaa Lakshmi in Bengaluru; Editing by Maju Samuel)
Comments