Dow Jones futures slip as Middle East tensions offset Fed rate cut hopes
Dow Jones futures inch lower by 0.07% to trade near 51,440 during European hours on Monday. S&P 500 futures decline by 0.09% to trade around 7,770, while Nasdaq 100 futures remain steady near 31,070.
US stock futures deliver mixed results as traders adopt a cautious stance amid surging safe-haven demand. This flight to safety was primarily driven by deteriorating geopolitical conditions in the Middle East, where tensions escalated sharply after Saudi-backed forces in Yemen launched a major offensive to reclaim territory from Houthi forces.
Middle East conflict intensified further following the Iran-aligned group's seizure of the Bab el-Mandeb strait, a critical maritime chokepoint linking the Red Sea to the Gulf of Aden that serves as a vital bypass route for regional crude exports avoiding the Strait of Hormuz.
Despite these geopolitical headwinds, broader market sentiment found underlying support as softer US jobs data eased pressure on the Federal Reserve to continue raising interest rates. Investors are now closely monitoring global risk sentiment while awaiting the release of the US ISM Services Purchasing Managers Index later in the day for clearer market direction. Corporate earnings are also taking center stage, with major releases expected from companies including Constellation Brands, Levi Strauss, PepsiCo, and Delta Air Lines.
US labour data seen resilient as Deutsche Bank still looks for further Fed hikes
Economists at Deutsche Bank acknowledge that the weaker September payrolls headline was underwhelming, but stress that “although the headline payroll number was disappointing, the wider labour-market picture remains relatively resilient, particularly alongside recent ADP and jobless-claims readings.” Against that backdrop, they note that their US team “continues to expect two further 25bp Fed hikes over the next couple of quarters,” arguing that the underlying labour-market signals remain consistent with a gradual extension of the current tightening cycle.
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BUZZ - Weakening demand causes Align stock to decline; brokers downgrade rating to "market perform"
October 5 - ** Align Technology (ALGN.O) shares fell 3% in pre-market trading to $139.45 ** Brokerage Evercore ISI downgraded ALGN's rating from "Outperform" to "In Line with the Market" ** The firm cited a "weakening consumer environment," a "sharp slowdown" in September demand indicators, and the potential negative impact of China's volume-based procurement (VBP) in 2027, leading it to adopt a more cautious outlook on Align’s earnings prospects ** VBP (volume-based procurement) is a bulk procurement initiative at the national level in China ** Evercore added that the dental market "has weakened significantly in the third quarter," noting declines in both consumer confidence and expectations ** Deterioration in consumer conditions may have started to affect demand for Invisalign, with Evercore ISI stating that the worsening seen in September "increased the risk that deteriorating consumer conditions may begin to be reflected in Invisalign demand" ** Invisalign is Align’s core business and is projected to contribute approximately $3.2 billions to the company’s total revenue of $4 billions in 2025 ** The broker said early signs of profitability improvement at Align are "beginning to show," but a weak consumer environment and potential VBP headwinds make the process "more challenging" ** As of the previous trading day's close, the stock had declined by about 8% year-to-date.
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