Wall St futures retreat as oil gains on Mideast uncertainty, eyes on Trump-Xi talks

By Johann M Cherian and Avinash P

Sept 24 (Reuters) - ‌Wall Street futures dropped ​on Thursday as ​the Middle East conflict remained far from a resolution while investors also exercised caution ahead of a keenly watched summit between Presidents Donald Trump and Xi Jinping.

US and Iran leaders exchanged barbs at the UN General Assembly ‌this week, which sent Brent crude prices back to above $100 a barrel. A potential ban of US ⁠diesel exports added to investor caution.

Shares of airlines and cruise operators, which are sensitive to energy prices, ticked down. JetBlue and American Airlines, Norwegian Cruise and ‌Royal Caribbean edged lower in premarket trading.

The ‌yield on the 30-year Treasury bond reached its highest since 2004, as the market priced in the likelihood of a long war and higher borrowing costs.

AI-related stocks that had powered the Nasdaq to record highs earlier this week were also among ​top decliners. Meta and Nvidia fell 1.9% and 1%, respectively, while Marvell and Intel slid about 3% each.

The spotlight is expected to turn next towards the summit, with investors anticipating discussions around AI regulation, the Middle East conflict and Taiwan. Top ⁠executives from General Motors, Meta, Apple, Amazon and Tesla are also expected to meet Trump and Xi.

US Treasury Secretary Scott Bessent, meanwhile, said on Wednesday that the two economic ​superpowers have agreed to extend their truce until January 10 next.

"This extension was shorter than had been floated by US officials beforehand, but does offer more time to potentially reach a longer deal," ​said Deutsche Bank analysts in a note.

At 7:32 a.m. ET, Dow E-minis ‌were down 151 points, or 0.29%, and S&P 500 E-minis were down 40 points, or 0.51%. Nasdaq 100 E-minis were down 278.5 points, or 0.91%.

The CBOE Volatility Index, sometimes referred to as Wall ⁠Street's fear gauge, climbed to a one-week top of 16.06 points.

Higher energy costs and recent data suggesting strong business activity led investors to bet on further interest rate increases by the Federal Reserve. They now see a 71% chance of at least a 25-basis-point hike next month — up from ⁠around 50% a day ago — the CME Group's FedWatch Tool showed.

New York Fed President John Williams, who has a vote on the Federal Open Market ​Committee, underlined those expectations. It was reasonable to think that rates might need to be raised again this year, he said.

A weekly report on jobless claims is due later in the day, along with remarks from other policymakers Thomas Barkin, Beth Hammack and Anna Paulson.

The focus this week has also ‌been on Meta after its consumer AI agent Muse split Wall Street into winners and losers. The social media giant on Wednesday launched Meta Charm, a small handheld gadget for using Muse.

Movers before the bell ‌included MGM Resorts, which dropped 9.3% after media mogul Barry Diller's People Inc withdrew its proposal to purchase the casino operator.

Knife River rose 5% after activist ⁠investor Starboard said it has taken a significant ‌stake and plans to push the construction materials ​and contracting service provider to improve margins or explore a sale.

Darden Restaurants dropped 5.5% after the Olive Garden parent missed first-quarter sales and profit estimates.

(Reporting by Johann M Cherian and Avinash P in Bengaluru; Editing ‌by Joyjeet Das)

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