US stock futures subdued amid Middle East, interest rate fears

Investing.com-- U.S. stock index futures tread water in evening deals on Monday, extending a decline on Wall Street as risk appetite remained fragile in the face of geopolitical tensions in the Middle East and higher-for-longer interest rates.

Israel was seen preparing retaliation for a large-scale missile and drone strike by Iran over the weekend. While Iran’s attack had done little damage, it raised the possibility of a wider war in the Middle East, keeping traders largely biased towards safe haven assets such as gold.

Hotter-than-expected U.S. retail sales data showed that consumer spending remained strong- a trend that is expected to underpin inflation in the coming months and keep interest rates high. Treasury yields jumped after the reading, pressuring stock markets.

S&P 500 Futures steadied at 5,104.0 points, while Nasdaq 100 Futures were flat at 17,878.50 points by 19:11 ET (23:11 GMT). Dow Jones Futures were flat at 38,000 points. 

Wall Street extends losses after dismal week 

Wall Street indexes clocked steep losses on Monday, extending a decline from the prior week as a slew of negative signals saw investors continue to lock-in profits from a strong first-quarter (Q1) rally. 

While there were some holdouts, the Q1 earnings season saw a weak start with disappointing readings from a slew of major banks. Persistent weakness in heavyweight technology firms also weighed, amid increasing fears that their earnings will not justify a melt-up in valuations through Q1.

The S&P 500 fell 1.2% to 5,061.82 points, while the NASDAQ Composite closed down 1.8% at 15,885.02 points on Monday. The Dow Jones Industrial Average fell 0.7% to 37,735.11 points. 

Johnson&Johnson, Morgan Stanley earnings on tap 

The Q1 earnings season is set to pick up on Tuesday with quarterly results from Johnson&Johnson (NYSE:JNJ), UnitedHealth Group Incorporated (NYSE:UNH), Bank of America Corp (NYSE:BAC) and Morgan Stanley (NYSE:MS).

Bank of America and Morgan Stanley will be in close focus after most of their peers clocked disappointing Q1 readings. 

Goldman Sachs Group Inc (NYSE:GS) bucked this trend, beating Wall Street expectations on strength in its investment banking arm. The stock rose 2.9% on Monday and was flat in aftermarket trade. 

Powell speech awaited for more rate cues 

Several members of the Federal Reserve are also set to speak later on Tuesday, with particular focus on Chair Jerome Powell for any more cues on interest rates. Powell is set to have a discussion with Bank of Canada Governor Tiff Macklem.

Powell’s talk comes in the wake of increasing signs that U.S. inflation will remain sticky in the coming months, giving the central bank more impetus to keep rates higher for longer. Markets were seen largely wiping out bets on a June rate cut. 

Such a scenario bodes poorly for stock markets.