U.S. stock futures pointed to a slightly weaker open on Thursday, with investors appearing cautious after the previous session ended with modest gains following uneven trading throughout the day.
A rebound in crude oil prices pressured sentiment as concerns resurfaced over escalating tensions between the United States and Iran.
U.S. crude futures climbed more than 2% after having dropped over 8% across the prior two trading sessions.
Oil prices moved sharply higher after reports indicated the U.S. launched another series of “self-defense strikes” in southern Iran, prompting Tehran to reportedly retaliate by targeting a U.S. military base.
“Investors are still broadly positioned for a de-escalation scenario in the Middle East, but recent headlines are a reminder that the path toward any agreement remains fragile,” said Daniela Hathorn, Senior Market Analyst at Capital.com.
Futures pared some earlier losses after the Commerce Department released inflation data showing U.S. consumer prices increased slightly less than economists had expected in April.
According to the report, the personal consumption expenditures (PCE) price index rose 0.4% in April following a 0.7% increase in March. Economists had forecast a 0.5% gain.
On an annual basis, the PCE price index accelerated to 3.8% from 3.5% in March, matching market expectations.
Core PCE, which excludes food and energy prices, increased 0.2% in April after rising 0.3% in the previous month. Economists had expected another 0.3% increase.
The annual core PCE inflation rate edged up to 3.3% from 3.2%, in line with forecasts.
Meanwhile, separate data from the Labor Department showed initial jobless claims in the U.S. rose slightly more than anticipated during the week ended May 23.
On Wednesday, U.S. equities posted modest gains despite subdued trading activity. The Dow Jones Industrial Average led the advance and reached another record closing high alongside the Nasdaq and S&P 500.
The Dow gained 182.60 points, or 0.4%, to close at 60,644.28. The Nasdaq Composite added 18.55 points, or 0.1%, to 26,674.73, while the S&P 500 edged up 1.24 points to finish at 7,520.36.
Market participants appeared hesitant after the strong rally seen in recent sessions, with many investors reassessing the near-term outlook for equities.
Traders also continued monitoring developments surrounding a possible diplomatic agreement between the United States and Iran, although many investors still expect negotiations to eventually produce a deal.
Hopes for a de-escalation in the conflict had previously weighed heavily on oil prices, contributing to a drop of more than 5% in U.S. crude futures earlier in the week.
Speaking at the White House, President Donald Trump said Iran wants to negotiate but noted the U.S. remains dissatisfied with the proposals currently on the table. He also said the Strait of Hormuz should remain open to all nations.
Secretary of State Marco Rubio added that the U.S. would give diplomacy “every chance to succeed” while emphasizing that President Trump continues to have additional options available.
Oil prices remained under pressure even after the White House denied reports that Iranian state television had obtained a draft framework outlining an initial unofficial memorandum of understanding between Washington and Tehran.
According to a Reuters report, the proposed framework would require Iran to restore commercial shipping activity through the Strait of Hormuz to pre-conflict levels within one month.
Sector performance on Wednesday was mixed. Airline stocks extended their recent rally, with the NYSE Arca Airline Index climbing 2%.
Telecom shares also posted solid gains, with the NYSE Arca North American Telecom Index advancing 1.6%.
Computer hardware, housing, and retail stocks also moved higher during the session.
Meanwhile, energy-related shares weakened as oil service companies tracked lower crude prices, dragging the Philadelphia Oil Service Index down 3.3%.
Gold stocks also came under pressure following a sharp decline in gold prices, with the NYSE Arca Gold Bugs Index falling 3.3%.