By Johann M Cherian and Ragini Mathur
July 27 (Reuters) – Wall Street’s main indexes were set to open higher on Monday after the United States and Iran paused hostilities, boosting risk appetite ahead of a week of major earnings, economic data and an interest rate decision.
A wide swathe of stocks sensitive to energy prices rose in premarket trading. United Airlines and Southwest Airlines were up 3.6% each. Cruise operators Royal Caribbean and Carnival rose 2.4% and 3%, respectively.
A 6.8% slide in Brent Crude prices to $90.1 a barrel weighed on shares of energy companies. Occidental Petroleum and Exxon Mobil were down about 3% each.
Markets ended last week rattled by escalating Middle East tensions, on worries that the conflict could fuel further price pressures ahead of the Fed’s monetary policy decision due on Wednesday.
Despite the announcement of the pause in attacks, shipping through the crucial Strait of Hormuz remained low. Attacks by Yemen’s Iran-aligned Houthis on Saudi oil installations along the Red Sea coast, another waterway vital to the global oil trade, also kept traders on edge.
The Fed has offered few clues on monetary policy outlook since Kevin Warsh took over as chair. Investors expect rates to be left unchanged this week, but are pricing in at least 25 basis points worth of rate hikes later this year, LSEG-compiled data showed.
“The Fed is not going to move this week. It would be difficult to justify a hike based on a short-term spike in oil prices,” said Thomas Hayes, chairman at Great Hill Capital.
The Personal Consumption Expenditures Price Index for June is due a day after the central bank’s decision. The Fed’s preferred inflation gauge will likely play a key role in shaping market expectations for interest rates later this year.
At 8:38 a.m. ET, Dow E-minis were up 571 points, or 1.1%, and S&P 500 E-minis were up 63.5 points, or 0.85%. Nasdaq 100 E-minis were up 383.75 points, or 1.36%.
Futures tracking the interest-rate-sensitive Russell 2000 small-cap index rose 1%, while the CBOE Volatility Index dipped 0.8 points to 17.77.
Earnings from ‘Magnificent Seven’ companies Microsoft, Amazon.com, Meta and Apple will test the AI trade further this week.
Microsoft, Amazon and Meta were up over 1% each, while Apple edged up 0.3%. Among chip stocks, Applied Materials gained 3.1%, Western Digital added 2.3% and industry leader Nvidia rose 0.7%.
Negative cash-flow reports from Alphabet and Tesla last week added to concerns about debt-fueled corporate spending. Chinese chipmaker CXMT Corp’s stellar debut also signaled intensifying competition for the U.S. semiconductor industry.
