U.S. stock futures declined on Tuesday, as the holiday-shortened trading week began with a renewed oil rally sharpening concerns about inflation.
At 4:32 p.m. (Bangkok Time), Dow contracts lost 0.8% and S&P 500 futures shed 0.32%, while Nasdaq-100 futures traded 0.11% lower as investors awaited economic figures and corporate results.
The Federal Reserve’s meeting next week is a key focus for markets. CME Group’s FedWatch measure puts the probability of a quarter-point interest rate increase at 60%, reflecting traders’ expectations ahead of this week’s inflation releases.
Friday’s employment report, which showed robust hiring in August, added to concerns that the central bank could raise borrowing costs this month. The prolonged Middle East conflict has also renewed inflation worries, with the sharp increase in crude over the past month exerting upward pressure on Treasury yields. Traders are concerned that higher energy costs will feed into broader price increases.
Oil extended its advance to a third session, reaching levels last seen six weeks ago after the United States and Iran traded strikes over the weekend. Brent futures gained 1.76% on Tuesday, taking the benchmark to $98.71 a barrel; West Texas Intermediate rose 2.92% to $94.15.
The gains also came as Iran reported that an agreement with Oman covering the management of shipping through the Strait of Hormuz was nearing completion. The continuing U.S.-Iran war remained central to concerns about energy prices and their inflationary effect.
Corporate reporting offers another focus for equity investors. GameStop is scheduled to release results on Tuesday, ahead of Oracle’s earnings, the main event on this week’s company calendar.
Attention will then turn to wholesale inflation figures on Thursday and the Consumer Price Index on Friday. The consumer report will help show whether inflation is easing toward the Fed’s 2% target or continuing to pose difficulties for policymakers and households. Both releases could alter expectations for next week’s rate decision, as could a further oil-price increase amid escalating Middle East tensions.
