US stock futures were down on Wednesday morning as escalating tensions in the Middle East pushed oil prices higher, impacting investor sentiment. Futures on the Nasdaq 100, S&P 500 Index, and Dow Jones Industrial Average were down by 0.98%, 0.40%, and 0.24% respectively at 8:17 a.m. EDT on July 22. Brent crude prices rose by about 3.97% to $94.62 per barrel, while WTI crude jumped 3.52% to $87.26 per barrel, reaching their highest in six weeks.
Major US indices had rebounded during Tuesday’s regular trading session, with the Nasdaq Composite gaining 1.29%, the S&P 500 advancing 0.89%, and the Dow Jones up 0.74%. However, Wednesday saw renewed caution, especially as reports indicated that the US and Iran were not ready to return to negotiating tables following continued military strikes. The 10-year US Treasury note yield ticked up 1 basis point to 4.64%, after touching a two-month high.
Market focus is now heavily on earnings reports from tech giants like Alphabet and Tesla, slated for after Wednesday's closing bell. Traders are particularly scrutinizing these reports for evidence that the companies' substantial investments in AI are yielding clear returns, especially after a recent cooling in the semiconductor sector's rally. Alphabet faces heightened scrutiny due to a delayed launch of a key AI model, while Tesla is expected to report its first quarterly cash burn in over two years.
Kevin Gordon, head of macro research and strategy at Charles Schwab, noted that high oil prices are fueling inflation worries and driving investors towards defensive sectors like utilities, while energy and materials sectors also saw gains. The Federal Reserve's policy meeting next week also remains a key consideration, with money markets indicating a roughly 30% chance of a rate hike and a 70% chance of rates remaining on hold.
