Futures signaled a weak start for Wall Street’s main indexes on Wednesday as bond yields continued to rise with investors pricing in aggressive moves by the Federal Reserve to suppress inflation.
The technology-heavy Nasdaq index marked its seventh straight session of declines on Tuesday – its longest losing streak since November 2016 – while the benchmark S&P 500 and the blue-chip Dow closed at a seven-week low.
The equities selloff, sparked by hawkish comments from Fed Chair Jerome Powell in August, has gathered momentum in recent days amid signs of an economic slowdown in Europe and China.
Meanwhile, data this month highlighted momentum in U.S. business activity and labor market, prompting traders to place bets on a 75 basis point interest rate hike by the Fed later this month. Fed fund futures implied investors were pricing in a 75% chance of such a move.
The 10-year Treasury yield, the benchmark for global borrowing costs, hit fresh June highs at 3.365%.
“What we’ve been seeing is a much bigger increase at the short-end of the yield curve, but now we’re getting a shift in the yield curve higher and those higher interest rates are providing some competition for stocks,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
“As long as interest rates continue to rise, we think the equity markets may be struggling going forward.”
The S&P 500 has shed over 9% from its August peak and is trading less than 7% away from its mid-June trough when it made the year’s low.
Powell’s speech on Thursday as well U.S. consumer price data next week will be parsed for clues on the path of monetary policy.
At 08:52 a.m. ET, Dow e-minis were down 79 points, or 0.25%, S&P 500 e-minis were down 9.75 points, or 0.25%, and Nasdaq 100 e-minis were down 16 points, or 0.13%.
Apple Inc was flat in premarket trading ahead of the unveiling of its new range of iPhone models and Apple Watches.
Nio Inc fell 5.1% after the Chinese electric vehicle maker reported a bigger second-quarter adjusted net loss compared with a year earlier.
Coupa Software Inc jumped 9.6% after the payment management software firm beat second-quarter estimates for revenue and profit.
Meanwhile, Walmart Inc, Target Corp and McDonald’s Corp were among retailers that announced bond offerings in a busy post-Labor Day session. (Reporting by Sruthi Shankar and Ankika Biswas in Bengaluru; Editing by Anil D’Silva and Maju Samuel)