Wall Street looked set for a strong start on Monday as easing tensions in the Middle East lifted risk appetite, sending US equity futures sharply higher while crude oil prices retreated after the United States and Iran agreed to pause strikes over the weekend.
As of 7:47 a.m. EDT, Dow Jones Industrial Average futures were up 571 points, or 1.10%, at 52,695. S&P 500 futures climbed 65.25 points, or 0.88%, to 7,512.75, while Nasdaq-100 futures gained 386.25 points, or 1.37%, to 28,668.50, signalling a positive opening for US equities.
The rebound in futures coincided with a sharp correction in oil prices as fears of supply disruptions eased. Brent crude futures for September delivery fell 7.81% to $89.22 a barrel, while West Texas Intermediate crude declined 6.82% to $83.22 a barrel, reflecting improving market sentiment after the weekend's diplomatic breakthrough.
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The cooling in geopolitical tensions offered investors some relief after weeks of volatility driven by the conflict between Washington and Tehran. However, concerns in the region have not disappeared entirely. Ukraine's reported strike on an Iranian commercial vessel in the Caspian Sea prompted Tehran to describe the incident as a hostile and criminal act, underscoring that geopolitical risks remain elevated.
Even as investors welcomed lower energy prices, attention is rapidly shifting to what could be one of the busiest weeks of the earnings season.
A string of quarterly results from technology heavyweights including Amazon, Apple, Meta Platforms and Microsoft is expected to test investor confidence in the artificial intelligence trade after Alphabet's earnings disappointed markets last week. The results are likely to have broader implications for semiconductor companies that have benefited from the AI investment boom.
"The biggest risk is the continuation of the spend," Ken Mahoney, CEO of Mahoney Asset Management, said to CNBC.
"And then the problem is, if they do listen to shareholders and wind down a little bit of that spend, or reduce the growth of that spend, then the rest of the market is not going to like it."
"So there's like a seesaw factor," he added.
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Markets are also awaiting the US Federal Reserve's policy decision on Wednesday. While the broader consensus expects the central bank to raise interest rates in September, traders continue to price in a meaningful possibility of a 25-basis-point hike as early as this week's meeting, according to the CME FedWatch Tool.
The positive start follows a difficult week for Wall Street. The S&P 500 and Nasdaq Composite ended Friday down 0.6% and 2.1%, respectively, extending their losing streak to a second consecutive week. The Dow Jones Industrial Average slipped 0.4%, marking its third straight weekly decline as concerns over chip stocks and the Middle East conflict weighed on sentiment.
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