S&P 500 futures rebound following oil price spike

Following Friday's sharp selloff triggered by Middle East tensions and surging oil prices, US index futures entered the new week attempting to rebound. In Sunday evening trading, S&P 500 futures rose 0.4%, while Dow Jones futures gained 0.3% with a 154-point advance and Nasdaq 100 futures climbed 0.6%.

How did the surge in oil prices affect stock markets?

Selling pressure across global markets was triggered by surging energy prices on news reports that the US and Israel are planning military action against Iran following the midterm elections. On Friday, Brent crude oil rose more than 3% to settle at $116.72 per barrel, marking its highest close since April. US benchmark West Texas Intermediate (WTI) crude rose 3.8% to settle at $103.27 per barrel. This jump in energy costs brought a decline of more than 650 points in the Dow Jones index on Friday, while the S&P 500 fell 0.5% and the Nasdaq Composite index dropped 0.2%. The pullback confirmed the 2nd consecutive weekly loss for both the S&P 500 and the Nasdaq.

What are markets expecting from the Federal Reserve (Fed) rate decision?

On the European front, the French bond market, shaken by rising borrowing costs, caught its breath following a move by credit rating agency Moody's. While France's 10-year bond yield reached 5% last week for the 1st time since 2002, Moody's decided to maintain the country's Aa3 credit rating and negative outlook. The agency stated that public debt would exceed 120% of gross domestic product in 2027 and that fiscal efforts beyond the April-May 2027 presidential elections would be required to strengthen public finances, adding that the outlook could be revised to stable if institutions reduce the budget deficit.

On equity desks, the main focus is locked on the Federal Reserve (Fed) rate decision concluding on Wednesday. Fed funds futures pricing reflects a 90% probability that policymakers will keep the benchmark rate unchanged in the 3.75% to 4% range. Christopher Hodge, Chief US Economist at Natixis CIB Americas, emphasized that avoiding a rate hike at the October meeting would be a prudent step to monitor economic indicators until the December meeting and prevent political fallout ahead of the midterm elections in early November.

This content is for information purposes only and does not constitute investment advice.