U.S. stock futures witnessed a decline in early trading on Tuesday, following a modest uptick in major indices the previous day. The downturn is attributed to the surging Treasury yields and persistent apprehensions surrounding China’s property sector crisis. On Monday, the Dow Jones Industrial Average posted a gain of 43 points (0.13%), closing at 34,007, while the S&P 500 advanced by 17 points (0.4%) to reach 4,337, and the Nasdaq Composite registered a 60-point (0.45%) increase, reaching 13,271.
The pivotal 10-year Treasury yield, considered a critical benchmark, reached a striking 4.57% early on Tuesday, marking its highest level since 2007. This surge comes against the backdrop of market anticipations of a more assertive stance by the Federal Reserve on interest rates. In recent days, various Federal Reserve officials have indicated the necessity of increasing rates and maintaining them at elevated levels for an extended duration.
Jamie Dimon, CEO of JPMorgan Chase (NYSE: JPM), cautioned that the market might not be adequately prepared for potential interest rate hikes up to 7% unless inflation is effectively controlled. The upswing in Treasury yields has presented challenges for riskier assets, particularly for long-duration stocks grappling with the impact of these rate escalations.
The U.S. dollar index surged past 106, marking its highest level in nearly ten months. This rise is attributed to the elevated Treasury yields in comparison to their international counterparts, potentially affecting U.S. equities by diminishing the competitiveness of multinational corporations.
Global financial markets remain unsettled due to the ongoing crisis in China’s property sector. Shares in China Evergrande (HK: 3333) plummeted following the failure of the heavily indebted developer to make a debt payment, which ultimately led to the arrest of former executives. Consequently, Hong Kong’s Hang Seng index plunged by 1.4%, marking its lowest point since November.
Tuesday’s U.S. economic data release includes the S&P Case-Shiller home price index for July at 9 a.m. Eastern, August’s new home sales data, and September’s consumer confidence figures at 10 a.m. Additionally, Federal Reserve Governor Michelle Bowman is scheduled to deliver a speech at 1:30 p.m.
