Global Tensions and Economic Uncertainty Weigh on US Markets
As the final quarter of the year gets underway, US stock index futures are feeling the pressure of escalating geopolitical tensions in the Middle East and a domestic port strike. Investors are on high alert ahead of key economic data releases that will provide insight into the health of the economy and the direction of monetary policy.
The S&P 500 and Nasdaq indexes fell to two-week lows in the previous session as investors dumped riskier assets following Iran’s missile strikes against Israel. While Israel and the US have vowed to retaliate, oil stocks such as SLB and Occidental Petroleum are seeing a boost, rising around 2% in premarket trading as crude prices surge over 2.5%.
Defense stocks like Lockheed Martin and RTX are also gaining traction, up 1.3% and 1.4% respectively, as the broader S&P 500 aerospace and defense index hits a record high. Analysts believe that if Israel’s response is measured, markets may take a more optimistic view, seeing the exchange as a brief flare-up rather than a full-blown conflict.
As of 05:28 am ET, Dow E-minis are down 174 points, or 0.41%, while S&P 500 E-minis are down 15.25 points, or 0.26%. Nasdaq 100 E-minis are also slipping, down 50.25 points, or 0.25%. Futures tracking the small-cap Russell 2000 index are down 0.8%, and safe-haven Treasury bonds are dipping after yesterday’s surge.
The CBOE Volatility Index, a key measure of market fear, is hovering near a three-week high at 19.5. Today’s ADP National Employment survey for September will provide valuable insight into the labor market, while Friday’s non-farm payrolls data will be closely watched.
The US Federal Reserve’s recent 50-basis-point rate cut has raised hopes for further monetary policy easing, with odds of a quarter-percentage-point rate reduction in November now standing at 63.3%. However, investors are also keeping a close eye on a dockworkers’ strike on the East and Gulf coasts, which could cost the US economy around $5 billion a day.
Some companies, such as Costco and Walmart, have said they are prepared for the strike, but others are feeling the pinch. Dow-component Nike is down 5% after withdrawing its annual revenue forecast, just as a new CEO takes the helm. The spike in oil prices and the port strike could raise inflation, which has been nearing the Fed’s 2% target recently.
Today, investors will also be parsing remarks from policymakers, including Beth Hammack, Alberto Musalem, Michelle Bowman, and Thomas Barkin, for clues on the direction of monetary policy.
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