US stock futures extend a two-day rally as investors remain cautiously optimistic amid rising energy prices and before the Federal Reserve’s interest-rate decision.
Contracts on the S&P 500 Index rose 0.2% as of 7:50 a.m. in New York, while Nasdaq 100 futures gained 0.2%. Brent crude oil prices hovered around $104. The Cboe Volatility Index dipped further to 22 from highs last week.
Investors have been conditioned to not sell “and ask questions later,” said Keith Lerner, chief investment officer and chief market strategist at Truist Advisory Services, adding that they “have been so battle tested — through Covid, inflation shocks, interest rate shocks, tariff shocks.”
Before the market opens, the producer price index will be released, providing investors an inflation gauge from before the start of the Iran war.
Later, Fed officials will release their rate decision at 2 p.m. New York time, with officials widely expected to hold rates steady. Following the policy announcement, investors will closely monitor Chairman Jerome Powell’s comments about the economy, higher fuel prices and private credit amid conflict in the Middle East.
“Markets will want a balanced tone that acknowledges inflation risks without signaling a more hawkish path,” said Tom Essaye of the Sevens Report.
Bond traders are unwinding recent wagers against US Treasuries after confidence returned that the central bank will be able to cut rates by at least one quarter-point before the end of 2026.
Meanwhile, Iran said its South Pars natural gas field was hit by US and Israeli strikes, briefly sending Brent crude oil above $105. Iraq began exporting oil through a route that avoids the Strait of Hormuz, while Iranian strikes continued overnight following the assassination of its security chief, Ali Larijani, in an Israeli strike. The Strait of Hormuz looks unlikely to open without a truce in the war, though Iran has been moving its own oil through the waterway at levels broadly comparable to transit before the war began.
In other news, a multi-asset credit strategist at Pacific Investment Management Co. said that mounting strains in the private credit market are a “wake-up moment,” making investors pay more attention to the liquidity risks they’ve taken.
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