US Futures Climb Amid Ongoing Oil Risks and Fed Rate Hike Worries
US futures indices are experiencing an uptick as oil prices are likely to increase following the lethal Houthi assaults on Riyadh’s airport, which may incite potential US intervention. Weak consumer sentiment and elevated expectations for a Federal Reserve rate hike in December are contributing to a cautious outlook among investors regarding economic growth. The CME FedWatch tool indicates that the likelihood of a 25-basis-point rate increase by the Federal Reserve this month stands at 19.4%. Dow Jones futures have increased by 0.21%, trading close to 52,030 during the European trading session on Monday. S&P 500 futures increase by 0.25% to approximately 7,880, whereas Nasdaq 100 futures advance by 0.15% to close to 31,150.
US stock futures exhibit an upward trend despite persistent inflationary concerns, supported by anticipations of a potential increase in crude oil prices following the recent deadly attacks on Riyadh’s King Khalid International Airport. The Houthi militants executed another strike on the airport on Sunday, following a previous attack that resulted in 12 fatalities and more than 300 injuries. In light of the increasing violence, US President Donald Trump is contemplating aligning with Saudi Arabia in retaliatory measures against the Iran-supported Houthis in Yemen. Economic data indicated persistent strain on consumer sentiment, as evidenced by the University of Michigan’s Consumer Sentiment Index, which fell to 46.3 in October from 48.1 in September, thereby failing to meet market expectations of 47.6.
Meanwhile, expectations for Federal Reserve monetary policy have experienced a modest adjustment: as indicated by the CME FedWatch tool, the probability of a rate increase of at least 25 basis points this month has decreased to 19.4%, a decline from 24.4% observed the previous week. Market participants exhibit a strong confidence in a year-end rate adjustment, currently pricing in an 86% probability of a rate increase at the Fed’s December meeting. These developments come on the heels of a robust performance on Wall Street last week, with all three major US stock indexes closing higher. A rally in technology shares played a crucial role in alleviating concerns related to rising bond yields and elevated oil prices.
Traders are preparing for a hectic week as the third-quarter earnings season commences with announcements from significant financial institutions. JPMorgan, Goldman Sachs, Citigroup, and Wells Fargo are scheduled to release their results on Tuesday, while Bank of America and Morgan Stanley will follow suit on Wednesday. In addition to corporate earnings, market participants will closely monitor significant inflation updates, with the September Consumer Price Index and Producer Price Index set to be released on Wednesday and Thursday, respectively. Analysts highlight that the rally in US equities broadened out, with the S&P 500 closing “46 points higher at 7811” on Friday and posting “strong gains across the real estate, consumer discretionary, healthcare and financial sectors.”
