Futures fall as rate worries push bond yields higher

Futures fall as rate worries push bond yields higher

(Reuters) – U.S. stock index futures fell on Wednesday as mega-cap stocks came under pressure from rising Treasury yields on concerns about the timing of interest rate cuts. Federal Reserve.

Mega-caps such as Apple, Meta and Nvidia dipped between 0.3% and 1.1% in pre-bell trading as the yield on Treasuries rose slightly, with that on five-year Treasuries falling near four-week highs, following a weak debt auction.

Bond yields reflect interest rate expectations. Higher rates mean more expensive financing for businesses and consumers, which can reduce their profits.

The CBOE Volatility Index, a gauge of Wall Street fear, also jumped more than three weeks ago, to 14.11 points.

The tech-heavy Nasdaq closed above the 17,000 mark for the first time on Tuesday, lifted by gains in Nvidia and other chip stocks, while the benchmark S&P 500 ended flat, with market participants doubting the possibility of an imminent start of monetary policy easing by the Fed. ride a bike.

Traders had started the year expecting a rate cut at least by March, but with persistent inflation and hawkish comments from central bankers, the majority now appear confident of a cut by at least minus 25 basis points only by November or December, according to the CME FedWatch tool. .

On the data front, the focus will be on the central bank’s Beige Book, due at 2 p.m. ET, which would shed light on the state of the U.S. economy, while personal consumption expenditure data from April, expected later in the week, could offer clues about the Fed’s rate cut trajectory.

Markets will also closely monitor comments from this year’s voting policymakers, including New York President John Williams and Raphael Bostic, throughout the day.

As of 5:49 a.m., Dow E-minis were down 216 points, or 0.55%, while S&P 500 E-minis were down 31.75 points, or 0.64%. Nasdaq 100 E-minis are down 129.25 points, or 0.68%

Marathon Oil rose 6.1% after a report said ConocoPhillips was in advanced talks to buy the Houston-based company in an all-stock deal for just over its $15 billion market value. of dollars.

On the quarterly earnings front, American Airlines cut its second-quarter profit forecast due to weaker pricing power, sending its shares down 7.8%. Other carriers such as Southwest and Delta were also down more than 1.7% each.

Quarterly results from Abercrombie & Fitch and DICK’S Sporting Goods are also due before the bell, while those from HP Inc, Agilent Technologies and Salesforce are due after the close.

Of the 480 S&P 500 companies that reported earnings Friday, 77.9% beat analyst estimates, compared to a long-term average of 66.7%, according to LSEG data.

Robinhood Markets added 3.2% after the trading app maker launched its first-ever stock buyback plan.

(Reporting by Johann M Cherian in Bangalore; Editing by Shinjini Ganguli)

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