Nasdaq 100 futures rally 1.3% as oil slide eases inflation fears

A sharp drop in crude oil prices triggered a relief rally across global equity markets, lifting tech stocks before a critical week for Federal Reserve policy and megacap earnings.

U.S. stock futures climbed Monday, with the Nasdaq 100 rising 1.3%, after Brent crude tumbled 7.8% to $89.41 a barrel on hopes of U.S.-Iran diplomacy.

"Investors responded positively to the sharp drop in the price of crude oil," David Morrison, senior market analyst at Trade Nation, said. "Investors are hoping that this could be a precursor to a resumption in peace talks."

The S&P 500 added 0.4% in early trading, while the Dow Jones Industrial Average gained 0.9%. Software firms led the advance, though chipmakers lagged as Nvidia-related debt protection costs surged on reports the company is in talks on more than $750 billion of AI infrastructure deals. Ten-year Treasury yields fell three basis points to 4.65%, and the Bloomberg Dollar Spot Index was little changed.

The lull in fighting removes a key source of inflation uncertainty that had recently rekindled bets on Federal Reserve rate hikes. While markets imply roughly a one-in-three chance of a quarter-point increase at Wednesday's Federal Open Market Committee meeting, most analysts expect Chair Kevin Warsh to hold rates steady, keeping the option to move in September if price pressures persist.

The relief rally extended across global markets. Europe's Stoxx 600 rose 0.5%, closing in on early July's all-time highs, with economically sensitive retail and travel stocks climbing more than 2%. In Asia, Chinese chipmaker CXMT Corp. surged 466% in its Shanghai trading debut after Asia's biggest initial public offering this year, a sign of continued demand for artificial intelligence-related stocks.

Energy stocks bucked the broader advance as crude prices slid. Occidental Petroleum Corp. fell 3.8% in pre-market trading, with the company's limited hedging program leaving it exposed to the drop. Brent crude's decline to $89.41 marks its lowest level since late June, before the U.S.-Iran conflict escalated and pushed prices above $97.

Gold rose 0.6% to $4,075.23 an ounce as lower bond yields boosted the appeal of non-interest-bearing assets. The euro edged up 0.2% to $1.1376, while the yen traded at 163.73 per dollar.

This week's earnings will test whether the rally can hold. Microsoft Corp. and Meta Platforms Inc. report Wednesday, followed by Apple Inc. and Amazon.com Inc. on Thursday. The results come after Alphabet Inc. tumbled following its report last week, as investors balked at rising capital expenditures tied to artificial intelligence. About one-third of S&P 500 companies report this week, with earnings on track to show a 26.5% increase over last year, according to LSEG IBES data.

This article is for informational purposes only and does not constitute investment advice.