U.S. stock index futures drifted lower on Wednesday as investors weighed mounting expectations for a Federal Reserve rate increase in September against persistent geopolitical risks in the Middle East.
S&P 500 futures fell 0.1% to 7,633.25 by 02:25 ET, while Nasdaq 100 futures declined 0.3% to 29,040.50. Dow Jones futures held steadier at 52,821.0. The moves followed Tuesday’s declines, when the S&P 500 closed down 0.71% at 7,631.47, the Nasdaq Composite fell 1.03%, and the Dow Jones Industrial Average shed 0.79% to end at 52,766.88.
Markets are pricing in a 67.9% probability of a 25-basis-point rate hike by the Federal Reserve in September, up from 34.7% a week earlier, according to CME FedWatch data. Federal Reserve Chair Kevin Warsh reiterated the central bank’s commitment to its 2% annual inflation target, though investors remain sensitive to incoming labor and inflation data.
Geopolitical tensions intensified after the U.S. launched fresh strikes against the Islamic Revolutionary Guard Corps, marking Washington’s second such action in a week. Iran responded by targeting U.S. bases in neighboring Gulf states. The dispute over the Strait of Hormuz has raised concerns about regional stability, with the U.S. asserting the waterway remains open to shipping while Iran claims it is closed. Available data indicates commercial traffic remains significantly below pre-conflict levels.
Economic indicators released this week offered mixed signals. August JOLTS job openings data, published on Tuesday, came in slightly weaker than expected but still showed improvement from the prior month. Stronger August manufacturing PMI figures provided little support to equities. Investors now await Friday’s nonfarm payrolls report for further direction on labor market conditions and potential implications for Fed policy.
