US stock futures pointed to a modestly higher open on Tuesday, with a decline in crude oil prices and a pullback in Treasury yields following losses for the major Wall Street indexes in the previous session.
US crude oil futures fell more than 2%, reversing part of Monday’s increase. Oil prices declined despite limited progress in negotiations between the United States and Iran over reopening the Strait of Hormuz.
Reports indicated that Iranian officials were not optimistic about reaching an agreement with the US before the November midterm elections.
The decline in crude prices was accompanied by lower Treasury yields, with the benchmark 10-year yield retreating after reaching its highest level since June 2007.
Investors Await US Inflation Data
Trading activity could remain limited ahead of Wednesday’s US consumer price inflation report, which investors will assess for indications about the Federal Reserve’s next policy decision.
CME Group’s FedWatch Tool indicated a 70.3% probability of another quarter-percentage-point interest rate increase at the Fed’s October meeting.
Changes in energy prices have remained a focus for markets because of their potential implications for inflation and monetary policy.
Wall Street Closed Lower on Monday
US stocks finished lower on Monday after coming under pressure early in the session.
The Nasdaq Composite fell 248.34 points, or 0.9%, to 26,820.38. The S&P 500 declined 59.72 points, or 0.8%, to 7,683.69, while the Dow Jones Industrial Average dropped 347.11 points, or 0.7%, to 51,481.51.
Monday’s early market weakness coincided with a rebound in crude oil prices. US crude futures rose by as much as 4.5% during the session after falling 2.3% on Friday.
Oil prices moved higher after US President Donald Trump rejected Iran’s conditional proposal for reopening the Strait of Hormuz. The proposal reportedly called for the strait to reopen and nuclear negotiations to resume in exchange for the United States lifting its blockade of Iranian ports.
The Wall Street Journal, citing US officials, separately reported that Trump had told aides he expected to resume bombing Iran after the November midterm elections.
Treasury Yields Reached Highest Level Since 2007
Although crude oil subsequently retreated from its session highs on Monday, Treasury yields continued to rise.
The benchmark 10-year Treasury yield reached its highest level since June 2007 as investors assessed the implications of elevated energy prices for inflation and the outlook for US interest rates.
Gold-related shares were among Monday’s decliners as the precious metal fell. The NYSE Arca Gold Bugs Index dropped 5.2%, reaching its lowest closing level in more than a month.
Interest rate-sensitive telecommunications stocks also declined, with the NYSE Arca North American Telecom Index losing 1.8%.
Semiconductor, banking and oil-services shares were also among the sectors that moved lower during the session.