Summary
U.S. stock futures gained modestly on Thursday evening, closing in on recovered ground following sharp losses earlier in the day. The move came after oil prices spiked amid renewed hostilities involving Iran, which knocked indexes lower during regular trading. Traders are awaiting the U.S. Personal Consumption Expenditures price index for January - the Federal Reserve's preferred inflation gauge - for fresh information on inflation and economic momentum.
Market action
S&P 500 Futures were up 0.2% at 6,690.50 points by 19:11 ET (23:11 GMT). Nasdaq 100 Futures rose 0.1% to 24,587.25 points, while Dow Jones Futures increased 0.2% to 46,817.0 points. The futures gains represented a partial rebound from sharp losses on Wall Street earlier in the session.
What drove the selloff
During regular trading, major U.S. equity benchmarks fell sharply as markets absorbed the inflation implications of higher energy prices. The S&P 500, NASDAQ Composite and the Dow Jones Industrial Average each declined in a broad-based selloff, with losses in the range of 1.5% to 1.8%.
Prices for Brent crude returned above $100 per barrel after Iran indicated it would continue to block the Strait of Hormuz, a key shipping lane for oil. The prospect of sustained higher oil costs stoked concerns that energy-driven inflation could rise in coming months, a dynamic that could discourage near-term interest-rate cuts by the Federal Reserve.
Risk-sensitive assets were hit as investors weighed the inflationary shock, and even gold - typically seen as a safe-haven asset - lost ground in the session.
Political pressure on the Fed and the policy outlook
Earlier in the day, U.S. President Donald Trump publicly urged the Federal Reserve to cut interest rates immediately. The president did not provide any explanation for the request.
Despite that call, markets appear skeptical that the central bank will move to lower rates soon. CME FedWatch data show a 98.3% probability that the Fed will keep rates unchanged at its meeting next week, and market expectations point to the central bank staying on hold until at least September.
PCE reading to be monitored
Investors and policy watchers are focused on the January PCE price index, due on Friday. Because the PCE is the Fed's preferred inflation measure, the report will be scrutinized for hints about future monetary policy. The upcoming print is not expected to incorporate energy-driven inflation from the recent escalation involving Iran, meaning it may not fully capture the latest oil shock's impact.
Notable movers
In aftermarket activity, Adobe Systems (NASDAQ:ADBE) shares slid by more than 7% after the software company said long-time CEO Shantanu Narayen will step down from the role. The news weighed on the stock despite Adobe reporting strong earnings, and the leadership change largely overshadowed the firm’s results.
Outlook
Markets are balancing immediate geopolitical risk and commodity-price-driven inflation concerns against the current expectation that the Federal Reserve will remain on hold in the near term. With the January PCE report due imminently, traders will be parsing the data for any clear signal on inflation trends and whether the recent move in oil ultimately shifts the policy outlook.