S&P futures declined early Wednesday, influenced by an increase in oil prices, as investors anticipated another active day of corporate earnings. Futures associated with the Dow Jones Industrial Average declined by 31 points, representing a decrease of less than 0.1%. S&P 500 futures declined by 0.3%, while Nasdaq-100 futures experienced a decrease of 0.6%. Brent crude futures experienced an increase of 4.8%, reaching $94.93 per barrel, marking their highest levels in over a month and briefly surpassing the $95 threshold.
West Texas Intermediate futures increased by over 4%, reaching $88.12 per barrel. Oil prices experienced an uptick as the U.S. conducted its 11th consecutive round of strikes against Iran. Secretary of State Marco Rubio remarked that Iran is “not serious about talks.” He stated, “If they’re serious, we’re serious. If they’re not, then we will do what is necessary to protect our interests and also the interests of our allies,” he said. Traders are closely monitoring oil prices due to concerns that sustained high levels could maintain elevated consumer goods prices, potentially prompting the Federal Reserve to consider raising interest rates.
As of Wednesday morning, fed funds futures indicated a 24.1% probability of a rate hike from the Fed this month, alongside a 69% likelihood of at least a quarter-point increase in September, based on the CME’s FedWatch tool. Earnings will once again be in the spotlight on Wednesday, with reports anticipated from ServiceNow, International Business Machines, Tesla, Texas Instruments, Alphabet, and AT&T. Investors are expected to monitor developments regarding AI expenditure, cloud demand, corporate technology budgets, and the forecast for the latter half of the year with keen interest.
Investors are closely monitoring the sustainability of robust demand for AI infrastructure and software, assessing whether it will continue to validate the high valuations prevalent in the technology sector as the earnings season progresses. “Q2 earnings season is ramping up, but with most hyperscalers yet to report, the market is still waiting for the definitive read on how AI investment is being monetized and translated into future capital spending,” said Julia Hermann.