U.S. stock futures were lower on Thursday as the sight of benchmark borrowing costs above 4% soured sentiment.
How are stock-index futures trading
- S&P 500 futures ES00, -0.54% dipped 23 points, or 0.6%, to 3934
- Dow Jones Industrial Average futures YM00, +0.05% rose 9 points, or less than 0.1%, to 32702
- Nasdaq 100 futures NQ00, -0.76% eased 98 points, or 0.8%, to 11864
On Wednesday, the Dow Jones Industrial Average DJIA, +0.02% rose 5 points, or 0.02%, to 32662, the S&P 500 SPX, -0.47% declined 19 points, or 0.47%, to 3951, and the Nasdaq Composite COMP, -0.66% dropped 76 points, or 0.66%, to 11379.
What’s driving markets
Rising bond yields continued to weigh on equities. Recent data indicating that the Federal Reserve’s campaign of interest rate hikes is yet to significantly slow the U.S. economy and suppress inflation has pushed benchmark borrowing costs TMUBMUSD10Y, 4.032% back above 4% as traders bet the central bank will have to tighten policy further.
The Fed is expected to increase interest rates by 25 basis points to a range of 4.75% to 5% at its March 22nd meeting. Since the central bank began raising borrowing costs from effectively zero about a year ago the S&P 500 has dipped more than 9%.
Over the last 24 hours Atlanta Fed President Raphael Bostic reiterated the need for rate hikes above 5%, and Minneapolis Fed President Neel Kashkari said he was worried that there was little evidence the service sector was slowing sufficiently.
News from China on Wednesday showing the world’s second biggest economy is bouncing back strongly from its COVID-lockdown torpor has added to concerns that inflationary pressures will persist.
And data from the eurozone published Thursday showed annual consumer price inflation of 8.5% in February, down only fractionally from January’s 8.6% and higher than the 8.2% forecast by economists.
U.S. economic updates set for release on Thursday include the weekly initial jobless claims and fourth quarter productivity and unit-labor costs, all due at 8:30 a.m. Eastern. Kashkari is expected to make further comments at 6 p.m.
“U,S. equity futures are edging lower overnight and are below the critical support at the 200-day moving average that has been tested of late, setting up a compelling test of animal spirits in coming sessions. The treasury market is providing fresh headwinds as the US 10-year treasury yield edged above 4.00% for the first time since November,” said strategists at Saxo Bank.
“With S&P 500 futures breaking below many key levels over the past couple of session the 3,900 level is definitely in play now,” Saxo added.
Also pressuring stocks was a 5% drop in Tesla TSLA, -1.43% after the EV maker’s investor day didn’t impress investors. On the other hand a 16% jump in shares of Salesforce CRM, +2.29% following its results after the closing bell is providing some support to the Dow Jones Industrial Average.
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