U.S. equity futures were little changed on Wednesday, suggesting a muted start for Wall Street following several sessions of declines as investors monitored developments in the Middle East and upcoming economic data.
Oil prices and U.S. Treasury yields moved lower after their recent increases, while geopolitical uncertainty remained in focus following another exchange of attacks involving the U.S. and Iran.
Iran launched missiles and drones toward U.S.-linked sites in Bahrain, Jordan and Kuwait on Wednesday. The action followed U.S. strikes against Iranian military targets on Tuesday.
The Iranian response came after U.S. President Donald Trump warned that retaliation would result in Iran being “hit much harder” and said the U.S. was still holding back “the biggest attack of them all.”
U.S. Crude Falls After Two-Session Rally
U.S. crude oil futures declined 0.8% on Wednesday after gaining more than 8% over the previous two sessions.
Treasury yields also moved lower, with the benchmark 10-year yield retreating after reaching its highest closing level in almost three years.
Recent increases in oil prices and bond yields have drawn investor attention because of their potential implications for inflation and monetary policy. The eventual effects will depend on how energy prices and financial conditions develop.
Markets are also awaiting Friday’s Labor Department employment report for further evidence about the condition of the U.S. labour market.
ADP Reports 38,000 Private-Sector Jobs Added in August
ADP reported that U.S. private employers added 38,000 jobs in August, below the 48,000 increase expected by economists.
July’s increase was revised to 46,000 jobs from the previously reported 44,000.
The ADP report provides an indication of private-sector employment conditions but does not necessarily correspond with the figures that will be reported in Friday’s government employment data.
The upcoming Labor Department report will provide additional information for investors assessing the economic and monetary policy outlook.
U.S. Indices Extend Declines on Tuesday
Wall Street recorded another negative session on Tuesday, with all three major indices closing lower.
The Nasdaq Composite declined 271.11 points, or 1%, to 26,099.77. The Dow Jones Industrial Average lost 419.02 points, or 0.8%, to finish at 52,766.88, while the S&P 500 dropped 54.67 points, or 0.7%, to 7,631.47.
The indices recovered from their intraday lows but still finished with notable losses.
The session coincided with an announcement from U.S. Central Command that American forces had conducted another series of strikes against Islamic Revolutionary Guard Corps targets in Iran.
Centcom said the action followed attempted attacks by the IRGC against commercial shipping in the Strait of Hormuz and U.S. military personnel stationed in the region.
Trump Issues Warning Following U.S. Strikes
President Donald Trump responded to the latest developments with a warning to Iran on Truth Social.
Trump said Iran would be “hit again at a much harder and higher level” if it retaliated.
“But it will not be the biggest attack of them all, that is waiting in the wings and, when it is over, there will be very little left of the Islamic Republic of Iran!” Trump said.
U.S. crude futures rose by more than 5% during Tuesday’s trading following the latest military developments.
The increase brought renewed attention to the potential inflationary effects of higher energy prices. However, the implications for inflation and interest rates will depend on whether the increase in oil prices is sustained.
ISM Manufacturing PMI Falls to 54.6
Investors also assessed economic data showing that U.S. manufacturing activity continued to expand in August, although at a slower pace.
The Institute for Supply Management’s manufacturing PMI declined to 54.6 from 55.6 in July, below economists’ forecast of 55.2.
Readings above 50 indicate expansion.
The manufacturing data, together with the latest private-sector employment figures, provide additional information ahead of Friday’s government jobs report.
While economic data may influence expectations for the Federal Reserve’s meeting later this month, the outcome of the central bank’s next interest-rate decision remains dependent on policymakers’ assessment of employment, inflation and other economic conditions.
Gold and Technology-Related Sectors Record Losses
Several areas of the U.S. equity market recorded larger declines during Tuesday’s trading.
The NYSE Arca Gold Bugs Index dropped 4.2% as gold-related stocks moved lower alongside the precious metal.
Networking shares also declined, with the NYSE Arca Networking Index falling 2.6%, while the Dow Jones Transportation Average lost 2.5%.
Software, housing and semiconductor stocks were also lower. Oil producers and pharmaceutical companies, meanwhile, moved higher against the broader market trend.
Wednesday’s relatively flat futures indicated a more limited move ahead of the open as investors continued to assess geopolitical developments, oil prices, Treasury yields and forthcoming U.S. employment data.
