Stock futures edged into the green as oil prices continued to drop further below $100 and a reading of wholesale inflation came in lighter than expected.
The gains were muted in volatile trading as traders continued to eye the latest with ceasefire negotiations in Ukraine and China Covid lockdowns that could wreak havoc on tech supply chains. Investors were also reluctant to commit capital ahead of a big Federal Reserve monetary decision Wednesday, where the central bank is expected to hike rates for the first time since 2018.
Dow Jones Industrial Average futures traded marginally higher. S&P 500 and Nasdaq 100 futures gained 0.1% and 0.3%, respectively. Earlier in the session, futures were down slightly.
Oil prices continued to fall for a second day. U.S. crude futures slid about 8% to $94.55 per barrel, after topping $130 about a week ago. Meanwhile, the international Brent benchmark was down than 7% to $98.46 per barrel.
The drop in oil prices put pressure on energy stocks. Occidental Petroleum fell more than 5%, while Schlumberger and Halliburton each lost more than 4%. The Energy Select Sector SPDR Fund was down 3.4% in premarket trading, on pace for its third straight negative day and its worst day since November.
Airline stocks got a boost in the premarket after several companies raised their revenue outlooks. Delta Air Lines rose about 6%, while United and Southwest gained about 4%.
A surge in energy prices in February led wholesale goods prices to their biggest one-month jump on record, the Labor Department reported Tuesday. The headline producer price index (PPI) rose 0.8% in February, which was slightly lower than the 0.9% estimated by Dow Jones.
However, core PPI, which excludes food, energy and trade services, rose just 0.2%. That was below the expectation of 0.6%.
In Ukraine, the capital city of Kyiv announced a 35-hour curfew that begins at 8 p.m. local time following Russian missile strikes that hit several residential buildings in the city. Russia and Ukraine were set to continue talks Tuesday, following a fourth round of negotiations Monday. Meanwhile, Russia is approaching a series of deadlines to make payments on its debt.
On Monday United States officials held “intense” talks with China to discuss, among other things, concerns that Beijing may attempt to help Russia blunt global sanctions. The discussion followed reports that Moscow requested military equipment from China for its war in Ukraine.
China is also facing its worst Covid outbreak since the height of the pandemic. Shenzhen, a major city in a key manufacturing hub in China, has shut down nonessential businesses and imposed city-wide testing, raising concern over the global economic recovery going forward.
“The market is jittery,” said Gene Goldman, chief investment officer at Cetera Investment Management. “So much concern about the Russian invasion, inflation, and the Fed. With growing concerns of a bear market, investors have been skittish.”
Still, he added he doesn’t feel a bear market is in the cards, saying fundamental data support a solid economic base.
Fed meeting kicking off
The Federal Reserve is slated to kick off an important two-day meeting Tuesday, with investors expecting a quarter-point rate hike to be announced Wednesday.
Mounting inflationary concerns will weigh on the Fed meeting. A lockdown in China could worsen supply chain issues, after a surge in coronavirus cases suspended production in cities such as Shenzhen, a key manufacturing city. The Russia-Ukraine conflict had already led to a spike in commodities prices.
“With both of these factors driving prices higher, the government has no choice but to increase rates to absorb the inflation that is accelerating,” said Benjamin Tsai, president and managing partner at Wave Financial Group.
There also will be adjustments to the economic outlook, projections for the future path of rates and likely a discussion about when the Fed can start reducing its bond portfolio holdings.