U.S. stock futures traded modestly lower early Thursday, signaling a weaker start for Wall Street after markets closed slightly higher in the previous session despite uneven trading throughout the day.
Investor sentiment was pressured by a recovery in oil prices as geopolitical concerns resurfaced following renewed military activity involving the United States and Iran.
U.S. crude futures rose more than 2% after suffering losses of over 8% during the previous two trading sessions.
The rebound in oil came after reports that the United States carried out another round of “self-defense strikes” in southern Iran, while Tehran reportedly responded by targeting a U.S. military base.
“Investors are still broadly positioned for a de-escalation scenario in the Middle East, but recent headlines are a reminder that the path toward any agreement remains fragile,” said Daniela Hathorn, Senior Market Analyst at Capital.com.
Futures trimmed some of their declines after fresh inflation data suggested price pressures in the U.S. were slightly softer than expected in April.
Data from the Commerce Department showed the personal consumption expenditures (PCE) price index increased 0.4% in April following a 0.7% rise in March. Economists had forecast a 0.5% gain.
On a yearly basis, PCE inflation accelerated to 3.8% from 3.5% in March, matching analyst projections.
Core PCE, which excludes food and energy costs, rose 0.2% in April after increasing 0.3% in the prior month. Economists had expected another 0.3% increase.
Annual core inflation edged up to 3.3% from 3.2%, also in line with market expectations.
Separately, Labor Department figures showed initial claims for unemployment benefits in the United States increased slightly more than analysts had anticipated in the week ended May 23.
On Wednesday, U.S. markets delivered modest gains despite a relatively subdued session. The Dow Jones Industrial Average outperformed and closed at another record high, joined by both the Nasdaq and S&P 500.
The Dow advanced 182.60 points, or 0.4%, to finish at 60,644.28. The Nasdaq Composite rose 18.55 points, or 0.1%, to 26,674.73, while the S&P 500 added 1.24 points to close at 7,520.36.
The uneven market action reflected lingering uncertainty among investors following the recent rally in equities.
Traders also remained focused on diplomatic developments involving the United States and Iran, with many market participants still optimistic that some form of agreement could eventually be reached.
Expectations that tensions could ease had previously weighed on oil markets, contributing to a drop of more than 5% in U.S. crude futures earlier in the week.
Speaking from the White House, President Donald Trump said Iran is seeking a deal but added that Washington remains dissatisfied with the offers presented so far. He also stressed that the Strait of Hormuz should remain accessible to all countries.
Secretary of State Marco Rubio stated that the United States would give diplomacy “every chance to succeed” while reiterating that President Trump retains alternative options.
Oil prices remained volatile even after the White House denied reports that Iranian state television had obtained a draft proposal outlining an unofficial framework agreement between Washington and Tehran.
Reuters reported that the proposal would require Iran to restore commercial shipping traffic through the Strait of Hormuz to pre-conflict levels within one month.
Sector performance was mixed during Wednesday’s trading session. Airline stocks continued their recent rally, with the NYSE Arca Airline Index climbing 2%.
Telecommunications shares also performed well, as the NYSE Arca North American Telecom Index gained 1.6%.
Technology hardware, housing, and retail stocks also posted notable gains.
Meanwhile, oil service companies came under pressure alongside weaker crude prices, dragging the Philadelphia Oil Service Index down 3.3%.
Gold-related shares also moved sharply lower after a steep decline in bullion prices, with the NYSE Arca Gold Bugs Index falling 3.3%.
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