Key facts
- U.S. stock index futures showed modest gains as Middle East tensions appeared to ease.
- Preliminary merger talks between Bristol Myers Squibb and AstraZeneca were reported, potentially creating a drugmaker worth nearly $400 billion.
- President Donald Trump indicated talks with Iran to reopen the Strait of Hormuz would take place.
- Brent Crude prices dropped 5.7% to $83.77 a barrel.
- SpaceX is scheduled to release its first quarterly earnings report post-IPO.
- Micron's stock dipped following reports of a Chinese rival's expansion plans.
U.S. stock index futures showed a slight increase on Monday, driven by hopes of de-escalating tensions in the Middle East which led to a drop in crude oil prices. Investors were also looking ahead to a busy week of corporate earnings and economic data releases.
Significant attention was given to potential consolidation within the healthcare sector, following a report that Bristol Myers Squibb and AstraZeneca had engaged in preliminary merger discussions. Such a deal could create one of the world's largest drugmakers, with an estimated valuation near $400 billion. Bristol Myers Squibb shares saw an 8% rise in premarket trading, while AstraZeneca's stock declined by 6%.
In geopolitical developments, U.S. President Donald Trump indicated that discussions aimed at reopening the Strait of Hormuz would take place during the day, though he did not specify a deadline for an agreement. This news contributed to a 5.7% fall in Brent Crude prices, which settled at $83.77 a barrel. The yield on the two-year Treasury note, a key indicator of short-term interest rate expectations, decreased by four basis points to 4.291%. Higher energy costs stemming from recent conflicts have added to global economic uncertainty.
Following positive earnings from major technology companies that highlighted the success of AI investments, market participants are eager to see how other AI-focused firms have performed. SpaceX is scheduled to release its first quarterly report since its public debut, with particular scrutiny on its AI expenditures and profits generated from its Starlink satellite communications network. Shares of the Elon Musk-backed company, which have traded below their initial offering price of $135 for nearly three weeks, saw a minor increase of 0.3%.
Other companies with significant AI ties reporting earnings this week include Palantir, Advanced Micro Devices, and memory chip manufacturers SanDisk and Western Digital. Palantir's stock was up 2.5%, while other related stocks showed little change. Micron experienced a dip of 1.3% after reports emerged that its Chinese competitor, CXMT, is contemplating the construction of a second memory-chip plant in Beijing and is in discussions for financing with a technology manufacturing hub supported by the local government.
As of 5:29 a.m. ET, Dow E-minis futures were up 329 points (0.63%), S&P 500 E-minis futures were up 36.75 points (0.49%), and Nasdaq 100 E-minis futures were up 151 points (0.53%).
Wall Street experienced a challenging July, impacted by global concerns regarding the trajectory of artificial intelligence, interest rate policies, and the ongoing conflict in the Middle East. Adding to market uncertainty, Federal Reserve chair Kevin Warsh reportedly suggested reducing the number of regularly scheduled rate-setting meetings, aligning with his objective to decrease Fed guidance on interest rates. Traders are currently factoring in a 64% probability of the central bank implementing an interest rate hike in September, according to CME Group's FedWatch Tool.
The healthcare, consumer, and energy sectors are also expected to be under the spotlight this week, with earnings reports anticipated from companies such as Eli Lilly, McDonald's, and Occidental Petroleum. The week's economic calendar is also dense with labor market data, including the official non-farm payrolls figures due on Friday. A business activity survey scheduled for later in the day is expected to provide markets with a clearer indication of the manufacturing sector's health throughout July. Additionally, traders are monitoring U.S.-Japan intervention efforts in currency markets aimed at curbing the yen's depreciation.