US equity futures moved modestly higher on Tuesday as crude oil prices fell more than 2% and Treasury yields retreated from recent highs, following declines across Wall Street in the previous session.
The decline in US crude futures came despite continued uncertainty surrounding negotiations between the United States and Iran over the Strait of Hormuz.
Reports indicated that Iranian officials saw limited prospects for an agreement before the US midterm elections in November.
Lower oil prices were accompanied by a pullback in Treasury yields. The benchmark 10-year Treasury yield moved lower after previously reaching its highest level since June 2007.
CPI Report in Focus Ahead of October Fed Meeting
Investors were also awaiting Wednesday’s US consumer price inflation report, which could provide further information on inflation trends ahead of the Federal Reserve’s monetary policy meeting in late October.
CME Group’s FedWatch Tool showed markets assigning a 70.3% probability to a 25-basis-point interest rate increase at the October meeting.
Recent moves in energy prices and Treasury yields have increased investor attention on the outlook for inflation and monetary policy.
Nasdaq, S&P 500 and Dow Decline
The major US stock indexes finished lower on Monday after trading mostly in negative territory during the session.
The Nasdaq Composite declined 248.34 points, or 0.9%, to 26,820.38, while the S&P 500 lost 59.72 points, or 0.8%, to close at 7,683.69.
The Dow Jones Industrial Average fell 347.11 points, or 0.7%, to 51,481.51.
The declines followed an early increase in crude oil prices, with US crude futures rising as much as 4.5% after falling 2.3% in Friday’s session.
The oil move followed US President Donald Trump’s rejection of a conditional Iranian proposal concerning the reopening of the Strait of Hormuz.
The proposal reportedly called for Iran to reopen the strait and resume nuclear negotiations in exchange for the United States lifting its blockade of Iranian ports.
Separately, The Wall Street Journal reported, citing US officials, that Trump had told aides he expected to resume bombing Iran after the November midterm elections.
Higher Yields Weigh on Several Market Sectors
Crude oil subsequently moved back from its session highs on Monday, but Treasury yields continued to increase.
The benchmark 10-year yield reached its highest level since June 2007 as markets assessed the potential effects of elevated energy prices on inflation and the Federal Reserve’s interest-rate outlook.
Gold-related equities declined alongside the precious metal, with the NYSE Arca Gold Bugs Index falling 5.2% to its lowest closing level in more than a month.
Telecommunications shares also moved lower as Treasury yields increased. The NYSE Arca North American Telecom Index declined 1.8%.
Semiconductor, banking and oil-services stocks were also among the sectors recording losses.
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