Aug 31 (Reuters) – Wall Street futures were under pressure early on Monday after the U.S. and Iran resumed military attacks, pushing oil prices higher and aggravating inflation concerns at a time when the interest-rate outlook has turned more hawkish.
The declines could set the tone ahead of September, a typically weak month for equities, and are expected to raise the stakes for the Federal Reserve’s upcoming meeting.
Traders see a nearly 60% chance of a hike at the September meeting, according to the CME FedWatch tool, a sharp increase from 41.4% a week ago, after Fed Chair Kevin Warsh said policymakers may need to raise rates if inflation doesn’t ease to the central bank’s 2% target.
“Chair Warsh delivered a distinctly more hawkish message than investors anticipated, making it abundantly clear that policy easing is not on the horizon,” said David Chao, global market strategist, Asia Pacific, at Invesco.
Warsh’s comments, delivered at his first appearance at the Fed’s Jackson Hole symposium on Friday, came after mixed data in recent weeks.
A consumer inflation report earlier this month showed price pressures were mild, but the Personal Consumption Expenditures reading, which is the Fed’s preferred gauge, came in hotter than expected.
The ambiguity could raise the stakes for upcoming data. Warsh said on Friday recent reports did not indicate that “underlying trends have meaningfully improved.”
The monthly U.S. employment report is due on September 4.
“Market participants are looking ahead more nervously to U.S. non-farm payrolls data on Friday, which is likely to be the highlight of the trading week amid heightened monetary policy uncertainty,” said Kyle Rodda, senior financial market analyst at Capital.com.
At 5:02 a.m. ET, Dow E-minis fell 51 points, or 0.10%, S&P 500 E-minis were down 10 points, or 0.13%, and Nasdaq 100 E-minis dipped 12.5 points, or 0.04%.
Nvidia rose 0.72% before the bell and was the only gainer among the Magnificent Seven group of stocks. Other chipmakers were also up, with Intel, Lam Research and Texas Instruments up 1.73%, 1.00% and 0.92%, respectively.
“I continue to favor areas of the market linked to structural growth themes such as artificial intelligence and digital infrastructure,” Invesco’s Chao said.
Energy stocks gained following a 2% jump in Brent crude, with Halliburton and Valero Energy climbing 2.46% and 2.17%, respectively.
Military strikes between the U.S. and Iran resumed in the Middle East, where disruption in the Strait of Hormuz has impeded oil shipments.
Most crypto stocks were higher, with bitcoin pinned above $78,000. Coinbase, Strategy and CleanSpark added between 0.97% and 1.92%, respectively.
(Reporting by Niket Nishant in Bengaluru; Editing by Maju Samuel)
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