Hezbollah rejects Israel-Lebanon ceasefire; NFPs ahead - what’s moving markets

Investing.com - Futures linked to the main Wall Street indices point broadly lower amid ongoing tensions in the Middle East that have dented hopes for an imminent deal to end the Iran war. Tehran-aligned Hezbollah militants reject a ceasefire deal between Israel and Lebanon, possibly complicating U.S.-Iran peace talks. Markets are now awaiting fresh U.S. jobs data, which could provide some insight into how the labor market is holding up against headwinds presented by the conflict. Elsewhere, senior U.S. officials reportedly held early talks with major artificial intelligence companies about the government purchasing shares in their businesses.

1. Futures muted

U.S. stock futures were subdued on Friday, as sentiment was clouded by renewed uncertainty around the prospects for U.S.-Iran peace talks and a sputtering artificial intelligence trade.

By 03:36 ET (07:36 GMT), the Dow futures contract was mostly unchanged, S&P 500 futures had fallen by 44 points, or 0.6%, and Nasdaq 100 futures had declined by 346 points, or 1.1%.

The tech-heavy Nasdaq Composite dipped by 0.1% in the prior session after an earnings report from chip giant Broadcom failed to live up to lofty Wall Street expectations, sending shares in big-name tech peers like Micron, Intel, and Advanced Micro Devices down sharply.

Yet the blue-chip Dow Jones Industrial Average and benchmark S&P 500 both advanced on Thursday, gaining 1.7% and 0.4%, respectively.

"[T]he Broadcom disappointment [...] triggered selling in certain semiconductor stocks and parts of the data center infrastructure complex but rather than cause a broad market slump, money instead simply rotated elsewhere, including pockets of value/cyclical," analysts at Vital Knowledge said in a note.

1. Hezbollah rejects Israel-Lebanon ceasefire

Further darkening the mood in markets was Hezbollah’s rejection of a ceasefire between Israel and Lebanon, which has cast fresh doubt around the possibility of a U.S.-Iran peace deal.

Tehran, which is aligned with Hezbollah militants, has made a cessation in fighting in Lebanon a key demand in peace negotiations with Washington. The U.S. and Israel launched a joint assault on Iran in late February that has since spread to include other areas of the Middle East, including Lebanon.

In a statement, Hezbollah leader Naim Kassem described the U.S.-brokered agreement between Israel and Lebanon earlier this week as "absurd, humiliating, and insulting."

According to the Associated Press, the Hezbollah announcement came as Israeli attacks killed at least four people. Lebanese troops moved into areas of southern Lebanon on Thursday which have been the scene of intense fighting for months, the AP said, citing state media.

1. Brent dips

Crucially, the stalemate between the U.S. and Iran has left the Strait of Hormuz, a key waterway off Iran’s southern coast, effectively closed to tanker traffic, crimping global supplies and threatening to destabilize the world economy.

Brent crude futures, the global oil benchmark, were last down by 0.4% at $94.69 a barrel, below recent peaks but still well above pre-war levels. U.S. West Texas Intermediate crude futures fell by 0.6% to $92.44 a barrel.

Worries have abounded that an energy shock caused by the closure of the Strait of Hormuz will drive up inflation in countries around the world, potentially forcing central banks to consider adopting a more hawkish policy stance in response. The Federal Reserve, for instance, is now expected to keep interest rates steady for the rest of this year, before potentially raising borrowing costs in 2027, according to CME’s FedWatch Tool.

1. U.S. NFPs ahead

The Fed’s rate trajectory could be updated later today, when the monthly U.S. employment report is due to be released.

Economists anticipate that the U.S. economy added some 85,000 roles in May, compared to 115,000 in April, while the jobless rate is seen matching the prior month’s level of 4.3%.

While the closely-watched nonfarm payrolls reading is considered to be the most comprehensive gauge of the labor market, separate data points this week have suggested that the jobs picture is resilient, albeit with employers wary of either hiring or firing workers.

This could factor into how Fed policymakers approach their upcoming interest rate decisions in 2026, as officials at the central bank are tasked with both corralling inflation and promoting maximum employment. Recent policy meetings have been unusually contentious, however, presenting an early challenge for new Fed Chair Kevin Warsh, whose predecessor Jerome Powell drew President Donald Trump’s ire for not advocating for rapid and aggressive rate cuts to boost the economy.

1. U.S. officials discussed taking stakes in AI firms - NOTUS

Senior U.S. officials held early talks with major artificial intelligence companies about the government purchasing shares in their businesses, NOTUS reported Thursday, citing people familiar with the matter.

The discussions focused on having the companies voluntarily transfer shares to the government, according to the report.

OpenAI CEO Sam Altman has discussed the idea with senior Trump officials, the NOTUS report said, while rival Anthropic was not involved in conversations over a government equity stake.

Returns from the investment could be used for public purposes, including distributing dividend payments to American households, the report said.

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