By Johann M Cherian
July 27 (Reuters) – Wall Street’s main stock index futures rose on Monday as the United States and Iran announced a pause in hostilities over the weekend, sending oil prices sharply lower.
A wide swathe of stocks sensitive to energy prices rose in premarket trading. United Airlines and American Airlines were up 3.7% and 3.9%, respectively. Cruise operators Royal Caribbean and Carnival rose 2% and 3.1%, respectively.
An 8.8% slide in Brent Crude prices to $88.30 a barrel weighed on shares of energy companies such as Occidental Petroleum and Exxon Mobil. They were down 3.6% and 3%, respectively.
Markets ended last week rattled by escalating Middle East tensions, with investors worried the conflict could fuel further price pressures ahead of the Federal Reserve’s monetary policy decision due on Wednesday.
Despite the announcement of the pause in attacks, shipping through the crucial Strait of Hormuz remained low. Attacks by Yemen’s Iran-aligned Houthis on Saudi oil installations along the Red Sea coast, another waterway vital to the global oil trade, also kept traders on edge.
The Fed has offered few clues on monetary policy outlook since Kevin Warsh took over as chair, fueling uncertainty over the path ahead for interest rates. Investors are pricing in at least 25 basis points worth of rate hikes this year, with a 31% chance it could come as early as this week, LSEG-compiled data showed.
Data on June durable goods is expected later on Monday and the Personal Consumption Expenditures Price Index, the Fed’s preferred inflation gauge, is due a day after the central bank’s decision.
“Policymakers face a difficult trade-off between evidence that inflation had been moderating and growing signs that higher oil prices could create a more persistent inflation shock,” analysts at Deutsche Bank said in a note.
At 5:50 a.m. ET, Dow E-minis were up 544 points, or 1.04%, and S&P 500 E-minis were up 75.75 points, or 1.02%. Nasdaq 100 E-minis were up 475.75 points, or 1.68%.
Futures tracking the interest-rate-sensitive Russell 2000 small-cap index rose 1.4%, while the CBOE Volatility index dipped 1 point to 17.59.
Earnings from several ‘Magnificent Seven’ companies, including Microsoft, Amazon.com, Meta and Apple, are due this week and will test the AI trade further.
Microsoft, Amazon and Meta were up over 1% each, while Apple edged up 0.1%. Chip stocks Marvell Technology gained 4.2%, Micron added 3.6% and industry leader Nvidia rose 1.2%.
Negative cash-flow reports from Alphabet and Tesla last week added to concerns about debt-fueled corporate spending on developing the technology. Chinese chipmaker CXMT Corp’s stellar debut also signaled intensifying competition for the U.S. semiconductor industry.
The tech-heavy Nasdaq is down 8% from its record high, while earlier this month the Philadelphia SE Semiconductor Index confirmed it has been in “bear market” territory since late June.
An index closing 10% below its most recent record high is called a technical correction, while a 20% drop is referred to as a bear market.
(Reporting by Johann M Cherian and Ragini Mathur in Bengaluru; Editing by Saumyadeb Chakrabarty and Joyjeet Das)
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