U.S. stock futures continued to fall on Wednesday as escalating tensions between Israel and Iran stoked fears of escalating conflict in the Middle East and alarmed markets.
Dow Jones Industrial Average futures (YM=F) fell 0.3%, and S&P 500 futures (ES=F) fell 0.3% as investors braced for Israel’s promised retaliation for a major missile attack by Iran. ) fell about 0.2%. Contracts on the Nasdaq 100 (NQ=F), which has a high proportion of high-tech stocks, fell about 0.1%.
Stocks started October under pressure as geopolitical concerns dominated the market, dispelling the upbeat mood surrounding hopes of a U.S. interest rate cut. At the same time, the oil price rally widened, with prices surging more than 5% on Tuesday to their highest level in nearly a year.
Brent crude oil futures (BZ=F) and West Texas Intermediate (CL=F) futures were both up about 3% on Wednesday, with traders buoyed by the prospect of supply risks from escalating Israeli-Iranian attacks. They are paying a premium.
The focus is on the possibility that soaring oil prices could push up U.S. inflation and hinder the Federal Reserve’s progress. At the same time, tensions in the Middle East and U.S. port strikes risk disrupting supply chains, raising concerns about the U.S. economy just as investors were beginning to feel confident of a “soft landing.”
With this in mind, the release of ADP private payrolls data later on Wednesday could feed into expectations for a Fed rate cut, with mixed job data and a key September jobs report on Friday. Very likely.
Read more: How Fed Rate Cuts Affect Bank Accounts, CDs, Loans, and Credit Cards
Meanwhile, Nike (NKE) stock fell 5% premarket after the sports shoe giant withdrew its outlook for the year, citing lower first-quarter sales. “We haven’t turned the corner yet,” the company’s chief financial officer told analysts on a conference call.
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