U.S. stock futures advanced in premarket trading on Monday, with technology shares leading the charge as a sharp decline in crude oil prices eased worries about inflation. Investors are now turning their attention to the Federal Reserve's upcoming policy decision and a heavy week of earnings from the largest technology companies.
Nasdaq 100 futures climbed 1.49% in early trading, significantly outperforming the broader market. S&P 500 futures rose 0.87%, while Dow Jones Industrial Average futures added 0.85%. The gap between growth and value contracts widened, with the Nasdaq's gain outpacing the S&P by roughly 70%, signaling market expectations for potential rate cuts.
Brent crude futures sank 6.3% to $90.60 per barrel, following reports that Washington and Tehran had agreed to halt attacks. The drop in oil prices reduced the probability of a near-term interest rate hike. According to the London Stock Exchange Group, the chances of a rate hike this week stood at 31%, while CME Group data indicated a 33.7% probability, down from 37.4% on Friday.
Shares of companies sensitive to fuel costs rallied on the news. Delta Air Lines gained 2.6%, American Airlines rose 3.0%, and cruise operators Royal Caribbean Group and Carnival both advanced 3.2%. In contrast, oil producers fell sharply; Occidental Petroleum dropped 3.8% and Exxon Mobil declined 2.6%. A basic travel basket posted a 3.0% increase, while a two-stock energy basket fell 3.2%.
Technology stocks benefited from the rate-relief trend. Microsoft, Amazon.com, and Meta Platforms each rose over 1%, while Apple edged up 0.3%. Semiconductor stocks outperformed, with Marvell Technology climbing 3.5%, Micron Technology up 3.2%, and Nvidia gaining 1.2%.
The rebound follows a weak prior week. The Nasdaq Composite fell 2.0% last week, the S&P 500 slipped 0.6%, and the Dow declined 0.4%. The Nasdaq remains 8% below its all-time high. This week, roughly one-third of S&P 500 companies are scheduled to report earnings, with year-on-year growth projected at 26.5%, according to LSEG IBES data.
Major tech earnings are expected this week: Microsoft and Meta report after the close on Wednesday, while Amazon and Apple follow on Thursday. Investors will be watching closely to see if the Monday rally holds as capital spending comes under further scrutiny.
On the economic calendar, June durable goods orders are due at 8:30 a.m. ET Monday. The Federal Reserve's two-day meeting begins Tuesday, with its statement expected at 2:00 p.m. Wednesday, followed by a press conference at 2:30 p.m.
Risks remain, however. The truce between the U.S. and Iran is tenuous, shipping through the Strait of Hormuz remains subdued, and Houthi militants have targeted oil infrastructure in Saudi Arabia. A rebound in oil prices could quickly reverse the gains from rate relief and sector rotation. The key indicator to watch will be whether Nasdaq futures continue to outpace the S&P; if the gap holds, it will support the rate-relief narrative, but if it narrows, the geopolitical rally may prove short-lived.
