By Niket Nishant and Tharuniyaa Lakshmi
Sept 9 (Reuters) – The main U.S. stock indexes were on course to open lower on Wednesday, when oil prices surged past the market-sensitive $100-a-barrel mark for the first time since July due to deepening tensions in the Middle East.
Traders have struggled to look past the U.S.-Iran war, now in its seventh month, which ups the risk of a broader conflict in the region.
Federal Reserve Chair Kevin Warsh’s focus on controlling prices has also boosted expectations of a hike in borrowing costs this month. Markets now see a 62.4% chance interest rates will be increased by 25 bps when the U.S. central bank meets next week, according to data from CME’s FedWatch.
“The big story of the day is oil prices, and they are taking the wind out of stocks. We’ve seen pockets of strength in the markets, but sentiment varies on a day-to-day basis,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
Brent crude held near $100 a barrel after crossing the psychological threshold for the first time since the middle of the year.
Investors will also await 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 rising 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 said in a note.
Any reaction in the bond markets could influence equities, which are typically pressured by elevated yields on risk-free government bonds.
At 08:27 a.m. ET, Dow E-minis fell 393 points, or 0.74%, S&P 500 E-minis dropped 32.5 points, or 0.42%, and Nasdaq 100 E-minis shed 177 points, or 0.60%.
Chipmakers Intel and Arm Holdings fell 2.11% and 0.97%, respectively, in premarket trading, and Nvidia was down 0.46%.
While investors are still gravitating to AI-related stocks, concerns about circular deals have turned the mood 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.
The Consumer Price Index report scheduled for Friday and Producer Price Index data on Thursday will be in focus for clues on the Fed’s rate path.
“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.
Separately, Dow rose 2.64% before the bell after Bloomberg News reported the chemicals maker was considering exiting its $20 billion chemicals partnership with Saudi Aramco.
Meta’s shares advanced 4.48% after it rolled out a long-touted AI assistant that can autonomously send emails, sell a car and book travel on behalf of a user.
(Reporting by Niket Nishant and Tharuniyaa Lakshmi in Bengaluru; Editing by Joyjeet Das and Pooja Desai)
Comments