By Devik Jain and Susan Mathew

(Reuters) – Wall Street futures surged on Tuesday on signs of a de-escalation in tensions between the Russia and Ukraine, with investors also awaiting key inflation data for clues on the path of interest rate hikes by the Federal Reserve.

Russia said some of its military units were returning to their bases after exercises near Ukraine, following days of U.S. and British warnings that Moscow might invade its neighbor at any time.

However, it was not immediately clear if it was a temporary signal of any kind of significant pullback.

Megacap growth stocks including Apple Inc, Google-owner Alphabet Inc, Inc, Microsoft Corp, Meta Platforms Inc and Tesla Inc rose between 1.8% and 3.4% in premarket trading.

Big banks including JPMorgan Chase & Co and Citigroup Inc jumped 1% each. Occidental Petroleum slipped 2.6%, leading energy shares lower as oil prices dropped from a seven-year high. [O/R]

The CBOE Market Volatility index, a gauge for investor anxiety, fell back after shooting up to its highest level in nearly three weeks in the previous session.

“War or no war, it makes market very volatile. And that’s unfortunately what we have to deal with,” said Andrea Cicione, head of strategy at TS Lombard in London.

“Until markets feel comfortable enough that this is not going to happen, we’re going to get this kind of volatility quite regularly.”

At 7:10 a.m. ET, Dow e-minis were up 382 points, or 1.11%, S&P 500 e-minis were up 68.75 points, or 1.56%, and Nasdaq 100 e-minis were up 304 points, or 2.13%.

The major indexes have had a rocky start to 2022, with the tech-heavy Nasdaq down over 11.8% so far this year as geopolitical tensions rattled investors’ sentiment already hit by worries over aggressive interest rate hikes by the Fed to combat surging inflation.

All eyes will be on producer prices data for January due at 08:30 a.m. ET.

Markets are pricing a 60.5% chance of a 50 basis point hike and a 39.5% chance of a 0.25% hike at the central bank’s March meeting. Minutes from the Fed’s January policy meeting are due on Wednesday.

Arista Networks jumped 9.3% after the cloud infrastructure supplier forecast current-quarter revenue above estimates after handily topping fourth-quarter profit.

A $5.4 billion deal to buy Israeli chipmaker Tower Semiconductor sent shares of Intel Corp up by 1.7%. The deal gives Intel access to more specialised production, better positioning it to take advantage of demand for semiconductors.

Shares of other chipmakers also rose, with Nvidia Corp gaining 3.9% ahead of its results on Wednesday.

Battered travel stocks including those of carriers and cruise operators also rallied.

(Reporting by Shreyashi Sanyal, Devik Jain and Susan Mathew in Bengaluru; Editing by Maju Samuel)