Wall Street futures fall on Middle East uncertainties ahead of Trump-Xi talks

Wall Street experienced a decline on Thursday amid ongoing Middle East tensions and investors' cautiousness ahead of the high-profile summit between Presidents Donald Trump and Xi Jinping. The Dow Jones Industrial Average futures fell 0.33%, the S&P 500 E-minis dropped 0.57%, and the Nasdaq 100 E-minis slid 1.01%. This drop followed the exchange of harsh words between US and Iran leaders at the UN General Assembly, causing Brent crude prices to reach above $100 a barrel again.

The yield on the 30-year Treasury bond reached a level not seen since 2004, indicating a high possibility of prolonged conflict.

Shares of airlines and cruise operators, which are sensitive to energy prices, also experienced a downturn. JetBlue and United both lost over 1% in premarket trading, while Norwegian Cruise and Royal Caribbean fell as well. Additionally, AI-related stocks, which had driven the Nasdaq to record highs earlier in the week, were among the top decliners. Meta and Nvidia dropped by 2% and 1%, respectively, while Marvell and Intel declined by approximately 3% each.

The focus will be on the upcoming summit, where discussions will revolve around AI regulation, the Middle East conflict, and Taiwan. Prominent figures from companies like General Motors, Meta, Apple, Amazon, and Tesla are expected to attend the meeting along with US Treasury Secretary Scott Bessent. Bessent previously confirmed that the two economic superpowers agreed to extend their truce until January 10.

Higher energy costs and robust business activity data led investors to anticipate further interest rate increases by the Federal Reserve. According to the CME Group's FedWatch Tool, there is now a 71% chance of at least a 25-basis-point hike next month, up from around 50% a day ago. New York Fed President John Williams, who holds a vote on the Federal Open Market Committee, echoed these sentiments.

He indicated that it was reasonable to expect further rate hikes this year. Jobless claims data and remarks from policymakers Beth Hammack and Anna Paulson were among the factors influencing investors' decisions.

The week's attention was also drawn to Meta following the launch of its consumer AI agent, Muse, and the introduction of Meta Charm, a handheld device for using the AI. However, the social media giant's performance was mixed, with some investors gaining while others lost. MGM Resorts saw an 8.3% drop after media mogul Barry Diller's People Inc. withdrew its proposal to acquire the casino operator.

Meanwhile, Knife River surged 3.6% following a report that activist investor Starboard had taken a significant stake and planned to push for improvements in margins or a potential sale.