US STOCKS-Wall St futures muted; Mideast talks, US-China summit in focus

By Johann M Cherian

Sept 23 (Reuters) - Wall Street's main stock index futures were muted on Wednesday, as investors awaited a positive outcome from negotiations to end the Middle East conflict ahead of the high-stakes US-China summit due on Thursday.

Crude prices pinned below $100 a barrel offered markets a sense of calm as Saudi Arabia restarted operations at a critical pipeline.

"Oil resuming a downward trend is the market's way of saying it is slowly starting to believe that energy supplies will flow again, and that there is a potential resolution to the conflict in the Middle East," said Dan Coatsworth, head of markets at AJ Bell.

Traders are awaiting updates from US and Iranian officials after their mediators commenced negotiations on the sidelines of the UN General Assembly on Tuesday.

Chinese President Xi Jinping is expected to arrive in Washington later in the day on a state visit. The agenda includes extending the trade truce reached last year between the two superpowers, AI regulation and US arms sales to Taiwan.

He is also expected to meet several top executives, including those from General Motors GM.N, Meta META.O, Apple AAPL.O, Amazon AMZN.O and Tesla TSLA.O. Shares of these companies were flat to marginally higher in premarket trading.

At 07:09 a.m. ET, Dow E-minis were down 22 points, or 0.04%, and S&P 500 E-minis were up 1.25 points, or 0.02%. Nasdaq 100 E-minis were down 33 points, or 0.11%.

Optimism around AI continued to power Wall Street as the tech-heavy Nasdaq notched its first intraday record high since early June on Tuesday.

The latest gains have been aided by strong reception of Meta's AI assistant Muse, which analysts say could benefit tech infrastructure stocks, while also spurring AI disruption chatter in pockets of the market. The S&P 500 Financials sector .SPSY logged its biggest daily drop since March on Tuesday.

JPMorgan Chase JPM.N, Charles Schwab SCHW.N and consumer-focused companies such as Uber UBER.N and Airbnb ABNB.O were marginally higher, steadying after sharp declines in the previous session.

On the earnings front, General Mills GIS.N rose 1.1% after the Cheerios maker beat first-quarter sales estimates.

AI spending and higher energy costs from the US-Iran war have had policymakers at the Federal Reserve flag the need to keep interest rates restrictive, contradicting last week's decision to increase borrowing costs.

S&P Global's September Purchasing Managers Index data is expected later in the day. Economists polled by Reuters are anticipating it to show business activity stayed in expansion territory — above the 50 mark.

Fed Governor Michael Barr is expected to speak later in the day and his remarks will be scrutinized for thoughts on policy outlook. Traders are now pricing in a 50% chance that interest rates could be hiked by at least 25 basis points next month, the CME Group's FedWatch Tool showed.