U.S. stock futures are falling on Tuesday as Treasury yields march higher, with investors closely focused on economic data that could affect the outlook for interest rates amid bets that the Federal Reserve will cut borrowing costs as soon as June.
Inflation and interest rates remain dominant themes in markets, with recent strength in stocks coming amid renewed expectations of rate cuts. Treasury yields, which move inversely to Treasury prices, jumped after the latest manufacturing data as investors pared their bets on a June rate cut, with yields heading higher again on Tuesday and adding pressure to stocks.
In the spotlight this week is the U.S. jobs report out Friday, but other closely watched indicators and remarks from central bank officials are also due in the interim. Tuesday will see the release of the JOLTS job openings report as well as February factory orders. Fed Governor Michelle Bowman will deliver remarks in the day ahead, as will Cleveland Fed president Loretta Mester and San Francisco Fed president Mary Daly.
Key Events
Latest Updates
(Dreamstime)
U.S. stock futures fell on Tuesday as Treasury yields marched higher, with investors closely focused on economic data that could impact the outlook for interest rates amid bets that the Federal Reserve will cut borrowing costs as soon as June.
Futures for the Dow Jones Industrial Average retreated 130 points, or 0.3%, after the index tumbled 240 points on Monday from its all-time high to finish at 39,566. S&P 500 futures fell 0.2% with contracts tracking the tech-heavy Nasdaq down 0.2%. The yield on the benchmark 10-year U.S. Treasury note rose to 4.35%.
Wall Street saw a weak start to quarterly trading on Monday, with the Dow and S&P slipping back from record highs as Treasury yields jumped. Manufacturing data were to blame, with a measure of March activity coming in hotter than expected and pointing to signs of persistent inflation, which rattled investor confidence that the Fed will move soon to cut interest rates from a generational peak.
“The first session of Q2 was a challenging one for U.S. markets. Treasuries saw their weakest session in several weeks as stronger manufacturing ISM data reignited doubts over the extent of Fed rate cuts this year,” noted Peter Sidorov, a Deutsche Bank analyst.
Inflation and interest rates remain dominant themes in markets, with recent strength in stocks coming amid renewed expectations of rate cuts. Treasury yields, which move inversely to Treasury prices, jumped after the latest manufacturing data as investors pared their bets on a June rate cut, with yields heading higher again on Tuesday and adding pressure to stocks. The 10-year yield was around its highest since late 2023.
Economic data will continue to be in focus as traders mull the rate outlook. Investors want to see signs that inflation is moderating and the economy remains resilient, but not running so hot as to temper action from the Fed.
In the spotlight this week is the U.S. jobs report out Friday, but other closely watched indicators and remarks from central bank officials are also due in the interim. Tuesday will see the release of the JOLTS job openings report as well as February factory orders. Fed Governor Michelle Bowman will deliver remarks in the day ahead, as will Cleveland Fed president Loretta Mester and San Francisco Fed president Mary Daly.
“It remains to be seen whether any of it will do much to dent confidence on Wall Street,” said Raffi Boyadjian, an analyst at broker XM. “Investors want to see more evidence that there’s a substantial risk of inflation not falling to 2% within the next few months before turning bearish on stocks.”
A spike in oil prices was helping U.K. stocks outperform on Tuesday as investors across Europe returned from the Easter long weekend, with trading resuming for the first time since last Thursday.
London’s FTSE 100 advanced 0.3% to lead Europe higher, with the U.K. equity benchmark outperforming, helped by its exposure to energy companies.
Shares in oil producers BP and Shell, heavily weighted in the FTSE index, gained 2.9% and 3.2%, respectively, as futures for West Texas Intermediate crude surged 2% to more than $85 a barrel, the highest since last October. A rally in oil prices has come on the back of recent economic data showing a recovery in Chinese manufacturing.
“The FTSE 100 leads the way in early trade this morning,” said Joshua Mahony, an analyst at broker Scope Markets. “Traders are growing increasingly confident in a China-led economic rebound this year. With that in mind-it comes as no surprise to see crude prices push above $84 for the first time in six-months.”
Elsewhere in Europe, the Paris CAC 40 hovered around flat while Frankfurt’s DAX shed 0.2%. The pan-European Stoxx 600 was 0.1% higher.
