S&P 500 and Dow futures slipped in Tuesday’s premarket while Nasdaq futures rose, as renewed U.S.-Iran fighting drove oil higher and revived inflation worries. Traders now brace for the June CPI report and testimony from Fed Chair Kevin Warsh.
The S&P 500 looked set to open lower on Tuesday as investors weighed a flare-up between the U.S. and Iran, even as chip stocks staged a rebound. S&P 500 futures slid 0.1%, while Nasdaq 100 futures climbed 0.4% and Dow Jones Industrial Average futures fell 137 points, or 0.3%.
The split reflects where money moved after Monday’s session. All three major indexes fell then, dragged down by a selloff in chip stocks and a spike in oil prices that came after President Donald Trump said the U.S. would reinstate its naval blockade of the Strait of Hormuz.
Oil rally revives inflation fears
Crude climbed again early Tuesday after a third straight night of U.S. strikes on Iran. Brent futures gained 3.3% to $86.05 a barrel, and West Texas Intermediate added 3.1% to $80.58. Higher energy costs feed straight into inflation, and bond markets reacted in kind.
The 10-year Treasury yield rose 1.4 basis points to 4.623%, having earlier touched an eight-week high of 4.636%. The dollar eased, however, with the DXY index down 0.2% to 101.075 as investors awaited the inflation print.
A crunch day for data
Several events on Tuesday could shift the narrative away from Iran. The Bureau of Labor Statistics is set to release the June consumer price index report, which will show what impact the conflict had on inflation last month. JPMorgan and Goldman Sachs are among the banks reporting as second-quarter earnings ramp up, while Fed Chair Kevin Warsh is due to testify before Congress on monetary policy and the economy.
Caution showed up in the volatility gauge. The Cboe Volatility Index rose 1% to 17.32, still below the level of 20 that tends to signal heightened market stress. UBS Chief Investment Officer Mark Haefele struck a measured tone, saying in a note that both sides remain motivated to avoid a return to all-out war.
Source: Barron’s
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