Key Takeaways:
Brent crude climbed 3.8 percent to $82.49 as US equity futures held steady ahead of a July jobs report expected to add 80,000 positions.
"Higher oil prices weighed on broader equities, with the dominant feature remaining sector rotation rather than outright selling," strategists at Danske Bank said.
S&P 500 futures rose 0.04 percent, Dow futures slipped 0.03 percent and Nasdaq 100 futures gained 0.3 percent in early European trading. The moves follow a session on Wall Street where the S&P 500 eased 0.18 percent to 7,710, the Dow fell 0.85 percent to 53,895.48 and the Nasdaq dipped 0.06 percent to 26,348. Energy led sector gains, with consumer staples and health care also advancing, while software names including Datadog, down 18 percent, and AppLovin, down 20 percent, dragged on the benchmark. The Dow's decline was amplified by its price-weighted construction, with six stocks accounting for 81 percent of the 503-point drop.
Oil extended gains as investors weighed the reopening terms for the Strait of Hormuz, where Iran and Oman agreed on measures that ban US and Israeli ships and introduce transit charges with fines reaching 20 percent of cargo value. West Texas Intermediate crude rose 2.75 percent to $77.29. Houthi attacks in Saudi Arabia's Najran province, which killed 11 civilians and hit energy sites and tankers, added to supply concerns. Brent has climbed from $79.50 a barrel earlier this week as the situation escalated, and European power prices jumped to 500 euros per megawatt-hour after drought forced Hungary's Paks nuclear plant offline.
The 10-year Treasury yield climbed five basis points to 4.66 percent, while the dollar index rose 0.31 percent to 99.97 and the yen weakened to 158.45 per dollar. Gold steadied near $4,300 an ounce after touching a seven-week peak, with Deutsche Bank projecting a $4,700 target by year-end on central bank buying.
The jobs report, due Friday, is the key event. Forecasts range from 18,000 to 83,000 new positions, with unemployment expected to hold at 4.2 percent. Markets price a 54.5 percent probability of a 25-basis-point Federal Reserve rate increase in September, down from 67 percent last week. A stronger-than-expected print could reinforce inflation concerns and lift yields further, while a weak number might revive bets on a pause. Bank of America and Vanguard have cautioned about possible signs of weakness in the labor market, while jobless claims registered at 199,000 and private payrolls gained 44,000.
The steady futures come after a strong earnings season, with 84.8 percent of S&P 500 companies beating estimates and profits climbing at their fastest pace since 2021. Yet major tech stocks that missed expectations fell an average of 12.5 percent, and 59 percent of NYSE-listed stocks finished lower even as the benchmark held near records. The S&P 500 hit a record high earlier this week before pulling back.
The VIX fell 4.17 percent to 15.15, suggesting limited demand for equity protection despite the oil-driven inflation worries. Investors will also watch for progress in Middle East talks, where any resolution could ease pressure on crude and temper the inflation outlook. Beyond the jobs report, the next event is the Fed's September meeting, with the rate decision scheduled for mid-month.
This article is for informational purposes only and does not constitute investment advice.
