US stock index futures inched higher on Thursday as investors grew more confident that the worst of the Middle East conflict had passed, while a wave of solid earnings allayed concerns about the economy.
Although no agreement to end hostilities involving Iran has been reached, hopes of diplomatic progress have lifted sentiment.
The benchmark S&P 500 and Nasdaq closed at record highs Wednesday, signaling renewed appetite for risk assets if diplomacy remains on track.
“Markets have learned to anticipate reversals after aggressive policy threats. That is not complacency so much as adaptation,” said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management.
At 7:12 am ET, Dow E-minis were up 24 points, or 0.05%, S&P 500 E-minis were up 5 points, or 0.07%, Nasdaq 100 E-minis were up 43.75 points, or 0.17%.
Sentiment also drew support after a senior Israeli official said Israel’s cabinet had met on Wednesday to discuss a possible ceasefire in neighboring Lebanon.
Such a ceasefire could remove a key sticking point to secure a broader peace agreement. President Donald Trump has also indicated Washington could yet reach a deal with Tehran.
However, equities remain vulnerable if diplomacy gives way to renewed escalation.
“Ongoing negotiations may bring more reversals and contradictory news, keeping trading conditions perilous,” Shalett said.
Market moves could also become more idiosyncratic as the earnings season gathers pace, offering fresh catalysts for investors.
US beverages giant PepsiCo gained 0.7% premarket after beating quarterly profit estimates, while Travelers fell 3.1% after its results.
Charles Schwab and a host of other companies report later in the day. Netflix is also due to report after the markets close.
Netflix shares fell 0.2% while Schwab dipped 0.1%.
Most banks that reported earnings so far this week surpassed estimates, stating that the consumer remains financially healthy, alleviating concerns about the growth engine of the US economy.
“With bets placed that the war has passed peak escalation and geopolitical risks are falling, investors have decided they don’t want to miss out on a slice of this earnings growth,” said Kyle Rodda, senior financial market analyst at Capital.com.
“The move in major US indices this month has been nothing short of remarkable. The risk from here is that the bar is set too high and investors are paying for earnings that may not materialize.”
Beaten-down sectors such as tech and software stocks have regained their footing this week. Small caps are also gaining ground, with the Russell 2000 index about 0.8% from its intraday record high.
Big movers in the premarket session included Voyager Technologies, which rose 7.4% after NASA signed an order for the company to conduct the seventh private astronaut mission to the International Space Station, the company’s first selection for such a mission.
Sneaker maker Allbirds slumped 30% after rising nearly sevenfold in the previous session on enthusiasm about its pivot to artificial intelligence.
Investors are also watching the shaky leadership transition at the Federal Reserve. Kevin Warsh, Trump’s nominee to succeed Jerome Powell as Fed chair, appears to face a less smooth and less timely succession than previously expected.
Trump also said on Wednesday that he would fire Powell from his seat on the US central bank’s Board of Governors if Powell does not vacate that post as well when his term as Fed chief ends on May 15.
