Key facts
- U.S. stock indexes were poised for a subdued open due to Middle East tensions and mixed corporate earnings.
- Investors are anticipating Friday's jobs data, though the Federal Reserve's focus on inflation remains a key concern.
- Traders are pricing in a 62% chance of a September rate hike.
- Rising crude oil prices are adding to inflationary pressures.
- Broadcom's stock fell premarket on a weaker-than-expected revenue forecast, while Snowflake surged on strong guidance.
U.S. stock indexes were poised for a subdued open on Thursday, with the S&P 500 and Nasdaq 100 futures indicating muted trading as investors grappled with geopolitical tensions in the Middle East and mixed corporate earnings.
Investors are looking ahead to Friday's jobs data for potential market catalysts. However, some analysts caution against overemphasizing the report, given Federal Reserve Chair Kevin Warsh's repeated emphasis on controlling inflation as the central bank's primary objective. Traders are currently pricing in a 62% probability of a Federal Reserve interest rate hike in September, according to CME FedWatch tool.
Kim Forrest, chief investment officer at Bokeh Capital Partners, anticipates a turbulent September, describing it as 'roller coaster season.' A prolonged conflict in the Middle East could exacerbate inflationary pressures, potentially leading to further rate hikes. Brent crude futures saw their fourth consecutive day of gains, rising 1.22% on Thursday, indicating a rebuilding of geopolitical risk premium in oil prices.
Daniela Hathorn, senior market analyst at Capital.com, noted that oil's geopolitical premium is creating another potential inflationary challenge. However, a slight easing in U.S. Treasury yields provided some relief to the stock market, which has been pressured by elevated yields in recent weeks. Benjamin Jones, global head of research at Invesco, expressed confidence that higher yields are less of a concern for the remainder of the year.
In premarket trading, Dow E-minis showed a gain of 0.28%, S&P 500 E-minis were up 0.06%, while Nasdaq 100 E-minis slipped 0.13%. Broadcom's stock fell 3.32% after its fourth-quarter revenue forecast missed Wall Street expectations, impacting Nasdaq futures. Conversely, Snowflake's shares soared 23.18% following a strong annual revenue forecast, providing a boost to the software sector. ServiceNow, Salesforce, and Adobe also saw gains in premarket trading.
With geopolitical risks clouding the economic outlook and a limited number of clear catalysts from the earnings calendar, investors may find few reasons to significantly push stocks higher this month. Historical data from eToro analyst Jakub Rochlitz indicates that nine of the S&P 500's worst-ever drops occurred in September.