Futures tied to the S&P 500 and the Nasdaq fell on Monday, as a fresh escalation between Iran and the U.S. in the Gulf rattled investors' sentiment, drove oil prices higher and knocked chip stocks. Markets started the week on shaky footing as Iran and the U.S. exchanged attacks in the Gulf and Tehran claimed it had closed the Strait of Hormuz, a vital conduit for global oil supplies.
The renewed violence cast doubt on an interim U.S.-Iran agreement signed last month that aimed to reopen the strait and end the war after 60 days of negotiations. Crude futures rose more than 2% after investors weighed the renewed threat to the key shipping route. Tech-heavy Nasdaq futures led declines, with semiconductor stocks among the biggest premarket losers.
Memory-chip makers fell sharply, with Micron Technology (MU.O), opens new tab down 5.2%, while Western Digital (WDC.O), opens new tab, Seagate (STX.O), opens new tab and Sandisk (SNDK.O), opens new tab dropped 6%, 4.8% and 6.6%, respectively. U.S.-listed shares of SK Hynix fell 9.3% after a blockbuster Nasdaq debut on Friday.
IShares semiconductor ETF (SOXX.O), opens new tab fell 2.7%. "U.S. futures are pointing to a lower open later today. This suggests that the rise in geopolitical tensions and the spike in the oil price are disrupting the momentum trade once again, which will hit the tech trade and the chip stock rally," said Kathleen Brooks, research director at XTB.
At 5:14 a.m. ET, Dow E-minis were up 28 points, or 0.05%, and S&P 500 E-minis were down 23.5 points, or 0.31%. Nasdaq 100 E-minis were down 303.75 points, or 1.01%. The Dow Jones index (.DJI), opens new tab closed up 0.29% at 52,637.01 on Friday. The futures contract is up 0.56% from that close. The moves came ahead of a busy week of economic data and corporate earnings that could test the resilience of the U.S. equity rally. The S&P 500 (.SPX), opens new tab is up more than 10% this year and less than 1% below its early-June record close. The benchmark posted a second straight weekly gain last week, overcoming sharp swings in semiconductor shares and renewed U.S.-Iran tensions that put energy-price risks back in focus.
Major U.S. banks, including JPMorgan Chase (JPM.N), opens new tab, Goldman Sachs (GS.N), opens new tab and Morgan Stanley (MS.N), opens new tab, will kick off second-quarter earnings this week. Netflix (NFLX.O), opens new tab, General Electric (GE.N), opens new tab and UnitedHealth (UNH.N), opens new tab are also due to report.
Investors will also parse several key economic reports, led by Tuesday's U.S. consumer price index, an inflation reading that could reset expectations for the path of interest rates. Producer prices and monthly retail sales data are due on Wednesday and Thursday, respectively. On Tuesday, Fed Chair Kevin Warsh is expected to deliver his first monetary policy testimony before Congress. Fed Governor Christopher Waller is scheduled to speak later on Monday on the economic outlook.
