Dow futures remain steady amid rising oil, diminishing Fed cut odds

Dow Jones futures are steady around 54,150 during European hours on Monday. Meanwhile, S&P 500 futures gain 0.16% to trade near 7,790 and Nasdaq 100 futures gain 0.39%, trading near 29,950.

US stock futures are mixed as traders exercise caution amid rising crude prices, driven by fading hopes for an agreement to reopen the Strait of Hormuz. The persistent geopolitical uncertainty continues to keep inflation risks and the interest rate outlook at the center of market focus.

Middle East tensions remain elevated as the ongoing US-Iran conflict enters a critical diplomatic phase, marked by intense military engagements and strategic pressure surrounding the Strait of Hormuz. Tehran noted that talks with Oman to establish a safe shipping route through the strategic waterway are nearing an agreement, though it cautioned that any deal would not lead to an immediate reopening.

US Nonfarm Payrolls (NFP) unexpectedly dropped by 23,000 in July, while sharp downward revisions to June’s figures, falling to 20,000 from an initially reported 57,000, highlight weakening labor market conditions. Consequently, the CME FedWatch Tool suggests markets now see nearly a 44% probability of a 25-basis-point rate hike in September, down from 67% a week earlier.

Societe Generale’s Kenneth Broux observes that the latest US data have materially shifted the policy debate, noting that “one hike remains on the table though for December” even as the “sudden softening of the labour market invites a revaluation of the tactical outlook and throws open the wider debate about the Fed’s dual mandate.” He frames the weaker US employment backdrop and associated repricing as a catalyst for investors to reassess both the timing of any further Fed tightening and the balance the central bank must strike between its inflation and employment objectives.

Traders' focus has also shifted to crucial US inflation figures due later this week. Meanwhile, on the corporate front, earnings reports from major AI-sector players, including Applied Materials, Cisco, and CoreWeave, are on tap.