US market today: S&P 500, Nasdaq futures edge lower as oil, yields rise ahead of Fed decision

US stock futures were trading lower in Tuesday's trade, September 15, as investors remained cautious ahead of the US Federal Reserve's policy decision, while surging Treasury yields and elevated crude oil prices fuelled expectations of the first rate hike in more than three years on Wednesday.

S&P 500 futures were down 0.3%, while Nasdaq-100 futures declined 0.4%. Futures tied to the Dow Jones Industrial Average also fell 229 points, or 0.4%. In the previous session, all three key indices closed in the red as a renewed sell-off hit chip and AI-related stocks after leading AI companies called for a slower pace of development.

Several technology stocks also fell in premarket trading, with Alphabet and Microsoft down around 1% each. Chipmakers, which bore the brunt of Monday's sell-off, were trading in a narrow range, while Nvidia edged marginally higher.

While there is little clarity so far on how such a slowdown would unfold, the latest declines have added to market gloom at a time when above-target inflation and fears of higher borrowing costs have already clouded the outlook for equities.

The pressure on equities was compounded by rising Treasury yields, as investors demanded higher compensation amid growing inflation concerns and expanding government deficits. In the latest move, the benchmark 10-year Treasury yield crossed the 5% threshold, reaching 5.041%, its highest level since 2007.

The sell-off in Treasuries has raised the stakes ahead of the Federal Reserve's interest-rate decision on Wednesday, with money markets pricing in a rate hike as almost certain.

Crude prices remain higher

Traders are also closely monitoring developments in the Middle East, as the latest attacks by Iran-backed Houthi rebels on Saudi Arabia and disruptions to key oil infrastructure have deepened concerns over energy supplies. The Houthis have also reportedly seized Perim Island in the Bab el-Mandeb Strait, adding to pressure on Saudi oil exports and global shipping routes.

Brent crude, the international benchmark, rose $2.75 to $108.43 a barrel, compared with around $72 a barrel before the start of the war in Iran in late February. US West Texas Intermediate crude gained $2.81 to $104.20 a barrel.

Meanwhile, Oman reportedly said it had to postpone a meeting on Monday in Muscat with Iran and other regional countries to discuss the Strait of Hormuz.

Is a Fed rate hike now almost certain?

A US Federal Reserve rate hike now looks almost certain after August inflation data showed that prices for a broad range of goods and services remained elevated, with higher tariffs and the ongoing conflict in the Middle East adding to price pressures.

The latest consumer inflation readings, coupled with the surge in crude oil prices, have further strengthened expectations of a rate increase. Traders were pricing in around a 90% chance of a quarter-percentage-point increase on Wednesday, with some market pricing putting the probability above 90%.

(With inputs from agencies)

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