By Johann M Cherian and Avinash P
Sept 24 (Reuters) - Wall Street was set to open lower on Thursday as simmering Middle East tensions lifted oil prices and Treasury yields, 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.
Pressuring riskier assets was a rise in Treasury yields, with that on the 30-year Treasury bond reaching its highest since 2004, as the market priced in the likelihood of a long war and higher borrowing costs.
However, analysts said that faith in the AI trade, which powered the Nasdaq to record highs earlier this week, is what has limited losses among riskier assets.
"People were maybe less willing to chase stocks, but they didn't seem particularly eager to sell them. At least on the tech side, we have not really seen investors give up on that trade," said Steve Sosnick, chief market analyst at Interactive Brokers.
Meta and Nvidia fell 1.8% and 1.1%, respectively, while Marvell and Intel slid about 3% each.
Oracle lost 4.2% after a report said the company sent a 'force majeure' notice to a New Mexico data center. Shares of Blue Owl, the project's developer, also lost 4%.
At 08:48 a.m. ET, Dow E-minis were down 138 points, or 0.27%, and S&P 500 E-minis were down 39.75 points, or 0.51%. Nasdaq 100 E-minis were down 300 points, or 0.98%.
The CBOE Volatility Index, sometimes referred to as Wall Street's fear gauge, climbed to a one-week top of 15.99 points.
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.
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 report on weekly jobless claims fell last week, pointing to a firming labor market.
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 10% after media mogul Barry Diller's People Inc withdrew its proposal to purchase the casino operator.
Darden Restaurants dropped 2% 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)
