By Niket Nishant and Utkarsh Hathi
Aug 31 (Reuters) – The main U.S. stock indexes were on course to open lower on Monday after military strikes between the U.S. and Iran drove up oil prices, fanning inflation worries as the interest-rate outlook turns more hawkish.
The losses could set the tone for September, typically a weak month for equities, and are likely to up the ante at the U.S. Federal Reserve’s meeting next month.
Traders see a nearly 60% chance of a rate hike at the Fed’s September meeting, according to the CME FedWatch tool, a sharp increase from 41.4% a week ago, after Chair Kevin Warsh said policymakers may need to increase borrowing costs if inflation does not ease to the central bank’s 2% target.
“He (Warsh) took any chance of a (rate) cut off the table,” said Thomas Kikis, head of markets, U.S. and Americas, at Standard Chartered.
“He was serious, he was measured, and he brought about a level of monetary orthodoxy. He came off very steady and appropriate,” Kikis said.
Warsh’s comments, delivered on Friday at his first appearance at the Fed’s Jackson Hole symposium, came after mixed data in recent weeks.
A consumer inflation report this month showed price pressures were mild in July, but the Personal Consumption Expenditures reading, the Fed’s preferred gauge, was hotter than expected.
The ambiguity could raise the stakes for the monthly U.S. employment report, due on September 4. Recent reports did not indicate that “underlying trends have meaningfully improved,” Warsh said on Friday.
“Market participants are looking ahead more nervously to U.S. nonfarm payrolls data on Friday, which is likely to be the highlight of the trading week amid heightened monetary policy uncertainty,” said Kyle Rodda, senior financial market analyst at Capital.com.
At 08:22 a.m. ET, Dow E-minis fell 98 points, or 0.18%, S&P 500 E-minis lost 17.25 points, or 0.22%, and Nasdaq 100 E-minis slipped 41.5 points, or 0.14%.
Nvidia rose 0.58% before the bell, outperforming the Magnificent Seven stocks. Other chipmakers were also up, with Intel, Lam Research and Texas Instruments gaining 0.27%, 0.78% and 0.67%, respectively.
“I continue to favor areas of the market linked to structural growth themes such as artificial intelligence and digital infrastructure,” said David Chao, global market strategist, Asia Pacific, at Invesco.
Military clashes between the U.S. and Iran resumed in the Middle East, where disruption in the Strait of Hormuz has impeded oil shipments.
Energy stocks rose following nearly a 1.71% jump in Brent crude, with Halliburton and Valero Energy climbing 2.65% and 2.07%, respectively.
Most crypto stocks were higher, with bitcoin pinned above $78,000. Coinbase, Strategy and CleanSpark added between 0.87% and 1.86%, respectively.
GameStop’s shares rose 3.53% after the company said it would pay about 27% of a previously announced $1.4 billion debt exchange through cash on hand instead of issuing new stock, preventing further share dilution.
The video game retailer said it expects second-quarter net sales to decline due to planned store closures and the divestiture of its France business.
(Reporting by Niket Nishant and Utkarsh Hathi in Bengaluru; Editing by Maju Samuel and Pooja Desai)
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