May 28 (Reuters) – U.S. stock index futures edged lower on Thursday as tensions escalated between the U.S. and Iran, dampening hopes of an imminent peace deal, while investors awaited key inflation data that could alter interest rate expectations.
Tehran targeted a U.S. airbase on Thursday after Washington launched fresh strikes. The move came hours after President Donald Trump rejected a report that he was close to a compromise deal with Iran.
Oil prices jumped over 2%, while U.S. Treasury yields edged higher with the continued closure of the Strait of Hormuz adding to inflation worries.
The personal consumption expenditures data later in the day, which includes the Federal Reserve’s preferred inflation measure, will be closely watched for hints on the monetary policy path forward under new chair Kevin Warsh.
“A higher-than-expected print will further boost hawkish Federal Reserve expectations and fuel the probability of a rate hike by year-end,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.
“A figure in line with expectations – or ideally softer than expected – could ease rate hike bets, but won’t take the idea of tighter monetary policy off the table as long as geopolitical uncertainties loom and energy prices remain persistently high.”
Money markets currently expect the Fed to remain on hold for the rest of the year, with some chances of a 25 basis point hike in December.
At 04:54 a.m. ET, Dow E-minis declined 53 points, or 0.1%, S&P 500 E-minis fell 6.75 points, or 0.09%, and Nasdaq 100 E-minis were down 63.5 points, or 0.21%.
AI OPTIMISM, EARNINGS GROWTH FUEL MARKET RALLY
Renewed confidence in AI and earnings growth momentum have underscored the recent rally, with all three major indexes closing at a record high on Wednesday.
The S&P 500 was on track for a ninth consecutive weekly gain, its longest winning streak since December 2023.
Among premarket moves, Marvell Technology dipped 2.2% after first-quarter results. The company’s shares have more than doubled so far this year.
HP was down 1.4% after second-quarter results, with the company warning that rising memory costs would pressure margins.
Drone companies rose after the Wall Street Journal reported that the Trump administration was in talks to fund drone firms. Unusual Machines jumped 33% while AeroVironment and Kratos Defense & Security Solutions added 9.1% and 11.2%, respectively.
(Reporting by Twesha Dikshit; Editing by Joyjeet Das)
Comments