Wall Street futures bounce back as US-Iran deal optimism balances hawkish Fed

NEW YORK: US stock index futures bounced back on Thursday as optimism about a Middle East peace deal lifted sentiment, tempering worries about a hawkish Federal Reserve under new chair Kevin Warsh.

All three major indexes fell in the previous session as investors priced in the likelihood of more Federal Reserve rate hikes, after Warsh underscored the need to curb inflation and other policymakers signaled higher borrowing costs ahead.

“The combination of a new chair regime, hawkish projections, and a wide dispersion of views implies a higher bar for near-term action in either direction,” said Mark Haefele, CIO at UBS Global Wealth Management.

“In our view, this points to an extended period of policy on hold, with meaningful adjustments more likely once the task force process is complete, and the committee has greater clarity on the economic outlook.

“Markets are currently pricing in a 50% chance of a 25-basis-point rate hike in September, according to CME Group’s FedWatch tool, higher than 27% priced in on Wednesday.

Still, oil prices sliding to a more than three-month low kept alive the hope that inflation could be tamed without hiking interest rates.

Meanwhile, the US and Iran released the text of an interim agreement their presidents have signed to end the war, extending the April ceasefire by another 60 days to allow the two sides to reach a final deal.

Intel’s shares rose 8.4% in premarket trading after US President Donald Trump said Apple had agreed to work with the company to design and manufacture its chips in the US.

Other technology stocks were also higher. Nvidia rose 1.3%, while Micron and Marvell Technology added 4.6% and 5.5%, respectively.

At 7.06am, Dow E-minis were up 165 points, or 0.32%, and S&P 500 E-minis were up 56.25 points, or 0.75%. Nasdaq 100 E-minis were up 441.5 points, or 1.49%.

Markets have regained ground from a slump in early June, with a resilient economy, a broadening rally beyond tech shares and optimism surrounding a US-Iran deal boosting sentiment.

Economic data on Wednesday showed US retail sales increased more than expected in May, with households purchasing more cars and other vehicles even as they paid higher prices for gasoline.

The Nasdaq and the blue-chip Dow were on track to end higher for a second consecutive week before Friday’s Juneteenth holiday.

Thursday also marks the once-in-a-quarter simultaneous expiry of derivatives contracts tied to stocks, index options and futures, also known as “triple witching”, which can boost trading volume and aggravate volatility.

Investors will also be watching weekly jobless claims data, due at 8.30am, for fresh clues on the health of the labour market.

Among other early movers, Rumble jumped 16% after rebranding to RUM Group and closing its acquisition of German AI cloud company Northern Data.

Smith & Wesson soared 15.3% after reporting a fourth-quarter rise in sales.

Shares of Accenture tumbled 11.1% after trimming the top end of its annual revenue forecast.

The company also announced plans to acquire a majority stake in Dragos and fully buy runZero and NetRise in a combined deal valued at US$4.18 billion.