Key Takeaways

• Futures fall: Dow futures dropped 60 points (-0.1%), S&P 500 futures fell 0.2%, and Nasdaq 100 futures slipped 0.4%.
• Wall Street held records: All three major indexes closed at all-time highs Wednesday as traders focused on earnings and AI.
• S&P’s streak at stake: The benchmark is on pace for a ninth consecutive weekly gain — the longest since 2023.
• MOU dismissed: The White House called an Iranian state TV-published MOU draft a “complete fabrication.”
• Fresh strikes in the Gulf: The U.S. struck Bandar Abbas; Iran’s IRGC retaliated against a U.S. base in Kuwait.
• Kuwait under attack: Kuwaiti authorities confirmed defending against drone and missile strikes.
• U.S. downs four drones: Reuters reported the military shot down four Iranian attack drones and hit a ground control station.
• “Self-defense” claimed: Washington insists the ceasefire remains and its strikes were defensive.
• Trump not satisfied: The president said Iran wants a deal but he’s not happy with the terms yet.
• Vital Knowledge optimistic: Analysts still hope a peace deal will be struck “in the coming days.”
• CMC’s Lipkow warns: “Trading volume is thinning out and price volatility is declining” amid wait-and-see mode.
• PCE on deck: Headline PCE expected at 3.8% year-on-year (from 3.5%); core at 3.3%.
• Rate hike fears: Fed officials are divided on the rate path given the energy shock’s inflation impact.
• Oil climbs: Crude prices rose, keeping energy inflation concerns alive.
• Stock movers: Bath & Body Works rose 9.7%, Abercrombie & Fitch gained 8.88%, HP slipped on margin warning, Marvell fell post-earnings.
• Drone makers rally: Unusual Machines and AeroVironment surged on WSJ report about potential administration funding.

U.S. stock futures pointed lower on Thursday, as a fresh exchange of strikes in the Gulf dented hopes for a U.S.-Iran peace deal and investors geared up for key inflation data closely watched by the Federal Reserve.

By 06:37 ET (10:37 GMT), the Dow futures contract was down 60 points, or 0.1%, S&P 500 futures had fallen 14 points, or 0.2%, and Nasdaq 100 futures had slipped 127 points, or 0.4%.

The main averages on Wall Street ended the day modestly higher, with analysts at Vital Knowledge suggesting that hopes remain that an agreement to end the war in Iran will be struck in the coming days. Still, some optimism was tempered by the White House’s declaration that a Memorandum of Understanding draft published by Iranian state TV was a “complete fabrication.”

A decline in Brent crude futures combined with “decent” earnings reports — particularly from Abercrombie & Fitch and Bath & Body Works — and “sanguine” economic commentary from companies at a closely-watched conference helped “catalyze big gains in consumer discretionary stocks,” the Vital Knowledge analysts said.

Energy-linked names, however, were under some pressure, while investors booked profits on some recently red-hot tech names.

“Investors are biding their time regarding the Middle East and, despite the resurgence of attacks, continue to hope for a constructive outcome to negotiations between the U.S. and Iran. However, this is causing trading volume to thin out and price volatility to decline,” said Andreas Lipkow, Chief Market Analyst at CMC Markets.

Fresh Air Strikes in Focus

The U.S. military struck targets near the Iranian city of Bandar Abbas earlier in the day, drawing retaliatory measures from Iran’s Islamic Revolutionary Guard Corps (IRGC).

The IRGC said it had struck a U.S. military base in Kuwait as retaliation for the Bandar Abbas attacks. Separately, Kuwaiti authorities said they were defending against drone and missile attacks.

Reuters reported that the U.S. military shot down four Iranian attack drones and hit a ground control station in Bandar Abbas.

The attacks marked a potential resumption in open hostilities between the United States and Iran, especially after Tehran had warned of retaliation following U.S. strikes earlier this week.

The U.S. military claimed that the attacks were carried out in “self-defense” and that a ceasefire with Iran remained in place.

Thursday’s attacks came shortly after U.S. President Donald Trump dismissed a report that Iran and Oman would manage shipping through the Strait of Hormuz under a deal to end the war. Trump also indicated that Iran wanted to make a deal, but that he was not yet satisfied with the agreement.

PCE Inflation Data Ahead

Oil prices climbed, maintaining concerns over a wave of energy-induced inflation that could persuade central banks around the world to raise interest rates.

More insight into that potential inflation burst is due on Thursday, with the release of the U.S. personal consumption expenditures price index for April.

The headline PCE reading is seen speeding up to 3.8% year-on-year from 3.5%, and slowing to 0.5% month-on-month from 0.7%. The core reading — stripping out volatile items like food and fuel — is expected to tick up to 3.3% year-on-year while matching March’s 0.3% monthly pace.

The gauge is one of the Federal Reserve’s preferred trackers of inflation. Recent Fed communications have indicated that officials remain divided over the path ahead for interest rates, given concerns around how the energy shock will impact price pressures in the United States.

S&P on Track for Record Weekly Streak

All three major U.S. indices closed at record highs on Wednesday, with traders mostly appearing to shrug off Iran-related worries in favor of solid quarterly earnings and soaring enthusiasm for artificial intelligence.

The benchmark S&P 500 is on pace to notch a ninth straight weekly gain — its longest winning streak since 2023.

In individual stocks, HP shares inched lower in premarket trading after the company flagged that margins would be weighed down by elevated memory-chip costs. Marvell Technology also dropped in the wake of first-quarter results.

Drone makers, including Unusual Machines and AeroVironment, rallied on a Wall Street Journal report that the administration was in discussions over funding for these names.