Wall Street futures dipped on Wednesday as oil prices and Treasury yields climbed following U.S.-Iran clashes in the Middle East. Renewed geopolitical risk is reviving inflation concerns and could further complicate the outlook for a September rate hike, just as the market enters its historically weakest month.
U.S. stock index futures slipped on Wednesday after fresh U.S.-Iran clashes in the Middle East pushed oil prices and Treasury yields higher. The clashes ended the uneasy calm of recent weeks and put geopolitical tension back at the center of trading, offering little reason to buy equities.
According to Reuters: "The Iranians have their maximum leverage now before the midterm elections," said Ryan Isherwood, founder and CEO of Significance Capital. Isherwood added that a rate hike right before the election is still unlikely, even as rate expectations have swung back and forth over the past week.
Futures and yields move together
At 4:25 a.m. ET, Dow E-minis rose 7 points, or 0.01%, S&P 500 E-minis dipped 6.25 points, or 0.08%, and Nasdaq 100 E-minis slipped 81 points, or 0.28%. Equities also came under pressure from elevated yields on U.S. Treasuries, which reduce the appeal of taking on stock-market risk.
Traders have sharply increased bets on a September rate hike over the past week, after Federal Reserve Chair Kevin Warsh said taming price pressures remains the central bank's chief focus. Renewed Middle East tensions could push oil prices higher still, adding to inflationary pressure by raising costs for consumers and businesses. Isherwood added that such a situation would typically demand rate increases, but the Fed could be in a bind if higher costs also start slowing economic growth.
Movers split as energy gains
Dell gained 9.65% in premarket trading after raising its annual profit and revenue forecast. The Magnificent Seven group was mixed: Alphabet and Tesla rose 0.81% and 0.42%, while Nvidia and Microsoft fell. Energy stocks extended their recent gains as Brent crude inched higher, with Chevron and Valero Energy each edging 0.4% higher.
Investors are also contending with seasonal weakness: since 1926, the S&P 500 has lost 0.7% on average in September, the only month with a negative average return, according to Fisher Investments, which cited data from Finaeon. The jobs report due Friday could help set the tone for equities after mixed recent inflation data.
Source: Investing.com
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