By Johann M Cherian and Utkarsh Hathi
March 20 (Reuters) – U.S. stock index futures slipped in choppy trading on Friday as the Iran war approached its fourth week, roiling energy markets and prompting investors to aggressively reprice bets on interest rate cuts by the Federal Reserve.
A report said the Trump administration is planning to occupy or blockade Iran’s Kharg Island to pressure Iran to reopen the Strait of Hormuz.
Crude prices rose, reversing all the losses recorded since major European nations, Japan and the U.S. hinted at efforts to boost energy supply. Brent crude prices were last up 0.7% at $110 a barrel.
Investors took some comfort in FedEx’s upbeat results and forecast despite geopolitical tensions and surging fuel costs, sending its shares up 9% in premarket trading. Rival United Parcel Service added 0.9%.
FedEx, often seen as a barometer of business activity, said global demand was holding steady at the start of March despite the war in Iran, while fuel surcharges were sheltering profits from surging fuel costs.
This week was packed with decisions by major global central banks that along with the Federal Reserve acknowledged how the conflict had complicated policymaking. While U.S. policymakers are still penciling in at least one quarter-point interest rate cut this year, investors are less convinced.
Traders have pushed their bets for a rate cut to sometime in 2027, from December 2026 earlier this month, according to LSEG-compiled data.
“Central banks adopting a ‘wait and see’ stance is the logical thing to do,” said Michael Brown, senior research strategist at Pepperstone.
“However, raising the prospect of tightening policy, to counter what appears a low risk of inflation proving more prolonged, raises the likelihood that a policy mistake will be made.”
At 7:15 a.m. ET, Dow E-minis were down 133 points, or 0.29%, and S&P 500 E-minis were down 25.5 points, or 0.38%. Nasdaq 100 E-minis were down 131.5 points, or 0.53%.
The CBOE volatility index, sometimes referred to as Wall Street’s fear gauge, edged up 0.77 points at 24.83. Futures tracking the rate-sensitive Russell 2000 index slipped 0.4%.
Wall Street’s benchmark S&P 500 and the blue-chip Dow were on track to finish their fourth-straight week in the red, although a modest bounce-back in AI stocks such as Advanced Micro Devices and Micron have cushioned the fall on the Nasdaq.
All the three indexes also slipped below their 200-day moving average, a technical indicator reflecting long-term momentum, while the small-cap-focused Russell 2000 index briefly logged a 10% drop from all-time highs earlier this week.
Super Micro Computer tumbled 26% after three people associated with the artificial intelligence server maker were charged with helping smuggle at least $2.5 billion of U.S. AI technology to China in violation of export laws.
Gains have been strong in energy stocks. The S&P 500 sector index is set for its thirteenth-straight week of gains as geopolitical events in Venezuela and the Middle East dominated much of the first quarter.
Energy stocks such as Halliburton and Cheniere Energy added over 1% each on Friday.
Tegna gained 9.3% after the Federal Communications Commission said it had approved the $3.54 billion sale of the local television station owner to Nexstar.
Amazon slipped 0.5%. Reuters reported that the megacap introduced its first smartphone, hoping to take on Apple and Samsung.
(Reporting by Johann M Cherian, Utkarsh Tushar Hathi in Bengaluru; Editing by Saumyadeb Chakrabarty and Maju Samuel)
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