By Niket Nishant and Avinash P
July 1 (Reuters) – Wall Street futures dipped on Wednesday as U.S.-Iran tensions cast fresh doubt over peace in the Middle East, marking a cautious start to the second half of the year, while investors awaited commentary from Federal Reserve Chair Kevin Warsh.
Tehran said it would not meet with top U.S. envoys who flew to the region following an outbreak of hostilities, suggesting that a breakthrough in peace negotiations may not be imminent.
However, a source with direct knowledge of the talks as well as an Iranian official said the U.S. and Iran held technical talks in Doha on Wednesday.
Repeated false dawns and contrasting rhetoric in negotiations have made the war situation difficult to track, leading some investors to focus instead on the economy’s underlying pillars.
But premarket declines indicate that the Middle East war remains difficult to ignore, especially given the impact the region has on global energy markets.
At 07:05 a.m. ET, Dow E-minis fell 109 points, or 0.21%, S&P 500 E-minis lost 8.75 points, or 0.12%, and Nasdaq 100 E-minis shed 91.5 points, or 0.3%.
Investors are also worried the U.S. Federal Reserve may need to hike rates and keep them elevated to control inflation.
Traders expect the central bank to raise rates at least once by the end of the year, according to data compiled by LSEG.
Additionally, data released on Tuesday showed U.S. job openings edged up to a two-year high in May, indicating that the labor market remains stable. That could give the Fed less reason to worry about employment, allowing it greater leeway to focus on price stability.
“The markets will increasingly home in on U.S. interest rate risk. The data is pointing in a direction that suggests employment is no longer an impediment to the Fed in tackling inflation and possibly raising rates,” said Kyle Rodda, senior financial market analyst at Capital.com.
Rate uncertainty is also high because Warsh, who took over as Federal Reserve chief in May, has launched a review that could reshape the way the central bank communicates with the public.
In his first policy meeting as Fed chair, Warsh achieved consensus around a policy statement jettisoning any forward guidance on the central bank’s near-term actions.
Warsh will join other central bank chiefs at a forum in Portugal later in the day. Traders will also parse U.S. manufacturing activity data from the Institute for Supply Management, expected on Wednesday.
Additionally, markets will look for clues on the health of the job market on Thursday, when the nonfarm payrolls report for June is due to be released.
Major movers in the premarket session included Nike, which fell 3.3% after its results as the sportswear giant signaled its turnaround strategy still faces obstacles.
Shutterstock plunged nearly 30% after calling off its planned merger with Getty Images.
Oklo added 5.4% after the nuclear technology company said the U.S. Department of Energy had approved the safety analysis for its Groves isotope test reactor.
(Reporting by Niket Nishant and Avinash P in Bengaluru; Editing by Joyjeet Das and Pooja Desai)
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