Futures Slip As Oil Prices Rise on Worries Ahead of Fed Meeting
US stock index futures fell on Tuesday as the conflict in the Middle East put oil prices near $100 a barrel, fueling inflation concerns that will be a major discussion when the Federal Reserve begins its two-day meeting later in the day.
Wall Street recovered from a technology-driven rebound in the previous session that saw the benchmark S&P 500 log its biggest one-day jump in more than a month, which also featured Nvidia’s widely watched annual developer conference.
Nvidia said the revenue potential of its artificial intelligence chips could reach at least $1 trillion by 2027, as the company unveiled a strategy to aggressively compete in the fast-growing market for real-time AI applications.
The company’s shares were lower in retail trading after rising 1.6% on Monday, while peers Advanced Micro Devices and Broadcom fell slightly.
Investors are now drawn to the escalating conflict in the Middle East that could keep the Strait of Hormuz closed, as US President Donald Trump’s call to allies to protect the strait fell on deaf ears.
Cruise stocks Delta and Carnival were down 1%, while energy companies Occidental and EQT were up about 1% each.
Brokerages raised their views on rising energy prices that could dampen economic growth, which was also flagged by Australia’s central bank when it raised interest rates earlier in the day.
The US Fed is likely to leave borrowing costs unchanged at the end of its two-day meeting on Wednesday.
But investors are pricing in the outlook as short-term Treasury yields rise and futures suggest a 25 basis point cut by the end of the year, according to data compiled by LSEG, down from around two before the war.
“While we do not expect central banks to adopt a more flexible policy, policymakers are likely to emphasize caution against inflation risks amid high oil prices and uncertainty about the length of the war,” UBS analysts said of central bank decisions around the world this week.
“A harsher-than-expected comment could add further volatility to a market vulnerable to volatile sentiment.”
At 05:11 am ET, Dow E-minis were down 104 points, or 0.22%, S&P 500 E-minis were down 20 points, or 0.30%. Nasdaq 100 E-minis were down 95.25 points, or 0.39%.
Futures tracking the rate-sensitive Russell 2000 index fell 0.7%, while Wall Street’s gauge of fear, the CBOE Volatility Index, added 0.57 points to 24.06.
Despite the global turmoil in the markets due to the war, US stocks have held up better than those in Europe and Asia in anticipation of the worst economic consequences.
However, analysts and the CEO of Goldman Sachs, David Solomon, stressed that investors still need to fully consider the effects of the war on the global economy.
The standoff also delayed a planned summit between the US and Chinese leaders at Trump’s request, casting a shadow over the stable relationship since they last met in October.
Among other stocks, ride-hailing app Uber added 2.3% after announcing plans to roll out robotaxis in 28 cities starting next year, powered by Nvidia’s autonomous driving software.
Plant-based meat producer Beyond Meat fell 6% after delaying its annual report, while its first-quarter earnings missed estimates.
(Reporting by Johann M Cherian in Bengaluru; Editing by Krishna Chandra Eluri)
This article first appeared in USA TODAY: Futures ease as oil prices worry ahead of Fed meeting
Reported by Reuters / USA TODAY
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