As tensions in the Middle East escalate, futures prices fall; employment data is on tap
U.S. Stock Index Futures fell on Wednesday, as geopolitical tensions and a port strike in the United States kept investors on edge before data that was expected to shed some light on the state of the economy and its monetary policy trajectory.
Wall Street's major indexes started the fourth quarter of the year with a gloomy outlook. The S&P 500, and Nasdaq touched lows that were about two weeks old in the previous session as investors dumped riskier assets in response to Iran firing missiles at Israel in retaliation to its attacks on Lebanon.
The markets held steady as Israel and the U.S. vowed a retaliation, but oil stocks like SLB and Occidental Petroleum gained about 2% in premarket trading. This was in response to crude prices which jumped by more than 2.5%, as traders priced possible disruptions of supply from the oil rich region.
Defense stocks like Lockheed Martin and RTX rose 1.4% and 1.3% respectively after the S&P 500 aerospace index reached a new high the previous session.
Analysts at ING Bank said that the situation was still volatile. However, if Israel responded in a way that is not aggressive, the markets could believe both countries were de-escalating after a short hostile exchange.
At 05.28 a.m. At 05:28 a.m. ET, Dow E Minis were down by 174 points or 0.41%. S&P 500 E Minis were also down 15.25 points or 0.26%. Nasdaq E-minis had fallen 50.25 or 0.25 percent.
After Tuesday's surge, futures that track the Russell 2000 small-cap index dropped 0.8%. Meanwhile, safe-haven Treasury Bonds also fell.
The CBOE Volatility Index (Wall Street's fear gauge) hovered at a high of three weeks and was last recorded at 19.5.
The ADP National Employment Survey for September is expected to give insight into the current state of the labor markets. It is due at 8:15 am. ET. Friday, the pivotal September non-farm payroll data will be released.
The markets ended last month with a positive note, after the U.S. Federal Reserve began its monetary policy easing cycle by introducing an unusual rate cut of 50 basis points in order to boost the jobs market. This is a priority for the central bank as it aims to achieve both price stability and low employment.
Odds of the Fed delivering a smaller quarter-percentage-point rate reduction in November stand at 63.3%, up from 42.6% a week ago, according to the CME Group's FedWatch Tool.
Investors were also watching a dockworkers strike that entered its second full day on the East Coast and Gulf Coast. Analysts at JPMorgan estimate that the walkout would cost the American economy $5 billion per day.
Costco, Walmart and Merit Medical Systems as well as McCormick, Designer Brands, McCormick, and Designer Brands all said that they planned to strike. In premarket trading, their shares were flat.
Analysts believe that the recent spike in oil price, combined with the port strike could increase inflation. It has recently approached the central bank's target of 2%.
Nike, a Dow component, fell 5% in the wake of its withdrawal of its annual revenue projection just before a new CEO was set to assume the reins at the sportswear company.
The markets will also be analyzing the remarks of policymakers such as Beth Hammack and Alberto Musalem throughout the day. Reporting by Johann M Cherian, Bengaluru. Editing by Pooja Deai
(source: Reuters)
