FUTURES tracking the Dow and the S&P 500 indexes attempted a recovery after a three-day slide, as investors cautiously returned to equities ahead of inflation data later on Thursday.
The festering conflict in the Middle East has pushed oil prices above $100 a barrel for the first time since July, clouding the outlook for equities and reinforcing expectations that interest rates could be raised this month.
Investors will closely watch the U.S. Producer Price Index report, due later in the session, for fresh clues on the Federal Reserve's rate path.
Although it typically gets less attention than the Consumer Price Index data, which will be published on Friday, any signs of accelerating input costs could reinforce fears that inflation pressures are broadening.
At 5:09 a.m. ET, Dow E-minis were up 108 points, or 0.21%, and S&P 500 E-minis were up 9.75 points, or 0.13%. Nasdaq 100 E-minis were down 26.25 points, or 0.09%.
"While additional hikes could create periods of volatility, history suggests that strong economic fundamentals can help offset the headwinds from higher rates," said Jeff Buchbinder, chief equity strategist for LPL Financial.
"As long as economic growth remains intact and recession risks stay contained, equity markets have historically been able to move higher even in a rising-rate environment."
HIGH TREASURY YIELDS BITE
Equities have also come under pressure from elevated yields on risk-free U.S. Treasuries. The Treasury Department said on Wednesday it would buy up to $6 billion in longer-dated Treasury bonds as part of an effort to keep yields under control.
However, the yield on the benchmark 10-year U.S. Treasury was at 4.8508%, its highest since 2023. "It's early days. But markets may be telegraphing to (Treasury Secretary Scott) Bessent that it will be tough for him to have meaningful control over long-end rates," ING strategists wrote.
Developments in the bond market have implications for stocks, as higher yields on risk-free U.S. Treasuries can make equities relatively less attractive.
"While an even more muscular attempt to lower yields may have had a better chance of working, their rise illustrates the marginal and short-term impact of buybacks," said Kyle Rodda, senior financial market analyst at Capital.com.
"Ultimately, a sustained drop in long-end yields can only be achieved by genuine shifts in macroeconomic policy: either the U.S. government pulling back on spending or the Fed lifting rates."
Traders see a 62.2% chance of a rate hike this month, according to the CME FedWatch tool.
Brent crude futures rose 0.81% and settled near $102 a barrel after crossing the $100 mark for the first time in over six weeks on Wednesday.
Meanwhile, shares of American Eagle Outfitters fell 11.37% premarket after the company stuck to its annual comparable sales forecast and said gross margins in the current quarter could be unchanged from a year earlier.
Apple was up 1.19% a day after it launched Duo, a folding $1,999 iPhone.
Meta gained 0.74% following its best day in more than two months. - Reuters
