U.S. stock futures pointed to a modestly higher opening on Thursday, with a sharp retreat in crude oil prices providing support after a mixed Wall Street session. Falling energy prices helped ease some recent inflation concerns, although weakness in Cisco Systems (NASDAQ:CSCO) following its earnings report could limit gains in the technology sector.
Crude oil drop supports US futures
Early buying interest was encouraged by a steep decline in crude prices, with U.S. crude oil futures falling around 2.3%.
Concerns about weakening demand have moved to the forefront of the energy market, outweighing supply risks associated with the continuing conflict in the Middle East.
The decline offers some relief to equity investors after the recent oil rally raised concerns that higher energy costs could reignite inflation and complicate the outlook for U.S. interest rates.
Cisco falls despite earnings beat
A negative reaction to corporate earnings could nevertheless restrict the upside for the broader market.
Cisco Systems (NASDAQ:CSCO) shares dropped more than 7% in premarket trading despite the networking company reporting quarterly results above expectations and providing an upbeat outlook.
The decline highlights the elevated expectations surrounding technology and AI-related companies following strong gains across parts of the sector.
Nasdaq and S&P 500 gained on Wednesday
Wall Street delivered a mixed performance during the previous session after stocks initially moved higher and remained mostly positive through much of Wednesday.
The technology-heavy Nasdaq climbed 143.04 points, or 0.5%, to close at 26,588.49. The S&P 500 advanced 20.30 points, or 0.3%, to 7,748.50.
The Dow Jones Industrial Average struggled for direction for much of the session before finishing 21.58 points lower, or less than 0.1%, at 53,770.27.
The gains in the Nasdaq and S&P 500 helped recover some of the weakness seen at the beginning of the week.
Softer US inflation data eases rate concerns
Stocks initially benefited from relatively subdued U.S. consumer inflation figures, which reduced concerns about the possibility of tighter monetary policy.
The Labor Department reported that consumer prices increased 0.1% in July after declining 0.4% in June, matching economists’ expectations.
Core consumer prices, which exclude food and energy, increased 0.2% after remaining unchanged in June, also in line with forecasts.
On an annual basis, headline inflation eased to 3.4% from 3.5%, while core inflation moderated to 2.5% from 2.6%. Both slowdowns matched market expectations.
The figures provided some reassurance that underlying inflation pressures were not accelerating despite recent volatility in energy markets.
AI stocks provide support to technology sector
Strength among artificial intelligence-related companies also contributed to Wednesday’s gains.
Positive reactions to quarterly results and guidance from CoreWeave (NASDAQ:CRWV) and Super Micro Computer (NASDAQ:SMCI) helped lift technology shares.
Computer hardware stocks were particularly strong, extending their recent rally as Super Micro Computer led the sector higher.
The NYSE Arca Computer Hardware Index surged 5.5% to reach a record closing high.
Networking and semiconductor stocks also recorded substantial gains, contributing to the Nasdaq’s outperformance.
Middle East tensions remain a market risk
Buying momentum faded as Wednesday’s session progressed, with investors remaining cautious about the conflict in the Middle East.
Recent increases in crude oil prices have raised concerns that an extended disruption to energy supplies could generate renewed inflationary pressure.
Although U.S. crude futures were little changed during Wednesday’s session, prices remained elevated following sharp gains over the preceding days.
Outside mediators continue attempting to bring the U.S. and Iran back to negotiations, but statements from both sides have provided little indication that the conflict is approaching a rapid resolution.
The subsequent 2.3% decline in crude prices on Thursday offered some relief, although geopolitical risks remain an important source of uncertainty for markets.
Investors balance lower oil prices against earnings reactions
Beyond technology, transportation, gold and brokerage stocks advanced during Wednesday’s trading, while housing and software companies experienced notable weakness.
Thursday’s early market tone is likely to depend on whether the sharp decline in oil prices can sustain improved risk appetite and offset negative reactions to individual corporate results such as Cisco’s.
With inflation, interest-rate expectations and Middle East developments continuing to influence sentiment, investors are likely to remain sensitive to both economic data and movements in energy markets.