Wall Street futures declined Thursday morning as crude oil prices jumped amid escalating Middle East conflicts, raising fresh concerns about inflation that have led the Federal Reserve to adopt a more cautious approach toward lowering interest rates in 2024.
Even positive earnings guidance from memory chip maker Micron Technology couldn’t boost market sentiment, with the company’s stock falling 4.5% in pre-market trading as investors worried about the firm’s increased capital expenditure plans given higher borrowing costs.
The semiconductor sector saw broad declines, with other memory chip companies that had performed well earlier this year taking hits. SanDisk dropped 4.5%, Western Digital declined 2.3%, and artificial intelligence giant Nvidia fell 0.4%.
Brent crude oil reached $115 per barrel following Iran’s attacks on energy infrastructure throughout the Middle East, launched in response to Israel’s strike on Iran’s South Pars gas facility. Meanwhile, U.S. oil benchmark traded at its largest discount to Brent in over a decade due to strategic petroleum reserve releases and increased shipping costs.
Federal Reserve officials kept interest rates steady Wednesday, with Chairman Jerome Powell warning of potential inflation increases ahead. Powell indicated it was premature to assess the economic impact of the ongoing conflict and maintained the central bank’s projection of just one quarter-point rate reduction this year.
Major investment banks including Morgan Stanley have now joined Goldman Sachs and Barclays in delaying their rate cut predictions from June to September. Market traders had already eliminated expectations for any rate reductions this year before the Fed’s announcement, with data suggesting the next dovish move may not occur until mid-2027.
“The big takeaway from the Fed decision is that the Fed will not be riding to the economy’s rescue, even if gas and diesel prices keep rising,” said Bill Adams, chief economist for Comerica Bank.
“Monetary policy can slow growth and inflation, or it can speed up growth and inflation. But it can’t offset an energy supply shock, which weakens growth at the same time that it raises inflation.”
As of 5:27 a.m. Eastern Time, Dow futures had fallen 135 points or 0.29%, S&P 500 futures dropped 22.25 points or 0.34%, and Nasdaq 100 futures declined 118.25 points or 0.48%.
Markets experienced selling pressure in both stocks and bonds following the Fed’s decision, pushing the Dow and Nasdaq below their 200-day moving averages while the S&P 500 reached a four-month low, approaching its own long-term technical support level. The 200-day moving average serves as a key indicator of long-term market momentum.
Market participants will closely monitor any additional comments from Fed policymakers throughout the day, along with the weekly unemployment claims report.
Attention will also focus on a U.S.-Japan summit where President Donald Trump may seek Japanese assistance regarding the Iranian conflict, following his previous unsuccessful appeals to allies for help securing the critical Strait of Hormuz shipping route.
Airlines sensitive to fuel costs, including Delta Air Lines and United Airlines, traded slightly lower in pre-market activity, while cruise operators like Norwegian and Carnival showed little movement.
Expectations for higher interest rates and a strengthening dollar pressured precious metals prices, causing mining companies such as Gold Fields and Endeavour Silver to fall approximately 9% each.
