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Rising crude prices and geopolitical tensions weigh on investor outlook
U.S. stock futures pointed lower on Wednesday, signalling a softer start to trading as investors assessed surging oil prices, escalating tensions between the United States and Iran, and a packed schedule of corporate earnings.
Crude oil extended its recent rally after U.S. Central Command confirmed it had completed an 11th consecutive night of strikes against Iranian targets. According to the military, the latest operations focused on command centres, maritime assets, aircraft hangars, drone storage facilities and logistics infrastructure in an effort to reduce Iran’s ability to threaten shipping through the Strait of Hormuz.
Meanwhile, Secretary of State Marco Rubio said Washington remained open to a diplomatic resolution but questioned Tehran’s willingness to negotiate.
“If they’re serious, we’re serious. If they’re not, then we will do what is necessary to protect our interests and also the interests of our allies,” Rubio said.
U.S. crude futures climbed nearly 3%, reaching their highest level in more than a month as markets continued to price in the risk of supply disruptions.
Technology earnings take centre stage
Despite growing geopolitical uncertainty, investor attention is also turning to earnings from several of the world’s largest technology companies.
Alphabet (NASDAQ:GOOGL), Tesla (NASDAQ:TSLA) and IBM (NYSE:IBM) are all scheduled to release quarterly results after Wednesday’s closing bell.
“The key question is whether earnings can justify both elevated valuations and the scale of AI-related investment,” said Daniela Hathorn, Senior Market Analyst at Capital.com. “Investors will be focused not only on headline revenue and profit, but also on cloud growth, AI monetisation, margins and capital-expenditure guidance.”
She added, “Strong results could allow technology shares to remain resilient despite higher oil, while weaker guidance could expose the market’s dependence on a relatively narrow group of companies.”
Strong earnings fuelled Tuesday’s rally
Wall Street ended Tuesday with broad-based gains after investors responded positively to a series of corporate earnings reports.
The Nasdaq climbed 329.13 points, or 1.3%, to close at 25,837.21, while the S&P 500 gained 65.92 points, or 0.9%, to finish at 7,509.20. The Dow Jones Industrial Average advanced 385.38 points, or 0.7%, ending the session at 52,224.64.
Among individual stocks, 3M (NYSE:MMM) surged 7.3% after reporting stronger-than-expected second-quarter results.
General Motors (NYSE:GM) rose 4.9% after posting quarterly earnings above analysts’ expectations, while Novartis (NYSE:NVS) gained 2.9% following better-than-expected second-quarter results.
Technology and gold shares outperform
Technology stocks led Tuesday’s advance, with the NYSE Arca Computer Hardware Index jumping 5.9%.
Semiconductor shares also rallied strongly, pushing the Philadelphia Semiconductor Index up 5.2%.
Outside the technology sector, gold mining stocks benefited from higher bullion prices, lifting the NYSE Arca Gold Bugs Index by 5.2%.
Brokerage, steel, oil producer and pharmaceutical stocks also posted notable gains, while software companies underperformed the broader market.
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