U.S. equity futures edged lower Monday, following on from the worst quarterly performance of the year for the S&P 500, as Treasury bond yields inched higher as investors react to a temporary U.S. government funding deal set against central bank messaging for higher long-term interest rates.
House Speaker Kevin McCarthy was able to push through a bipartisan deal over the weekend, with the support of 209 Democratic lawmakers, that will fund the government through November 17. The deal, however, leaves open the possibility of yet another shutdown drama as conservative lawmakers in the Republican party vowed to challenge McCarthy’s position and push for deeper spending cuts in the next round of talks.
To be absolutely clear, the spending battle for fiscal
2024 is far from over, and a shutdown on November 18 is
entirely possible,” said Ian Shepherdson of Pantheon Macroeconomics. “The right wing in the House is just too big
to ignore, but their demands cannot be met, given Democrat
control of the Senate and White House.”
U.S. Treasury bonds extended their sell-off following the dramatic weekend agreement, which received Senate approval just hours before a midnight Saturday deadline that would have shutdown the Federal government, with 10-year note yields rising to 4.651% in early New York trading.
Benchmark 2-year notes, meanwhile, were marked at 5.112% while the U.S. dollar index, which tracks the greenback against a basket of its global currency peers, rose 0.22% to 106.642.
The higher yields, which followed a relatively muted August PCE inflation report, put today’s comments from Federal Reserve Chairman Jerome Powell in focus as investors look for clues as to the central bank’s next move on interest rates between now and the end of the year.
Powell, as well as Philadelphia Fed President Patrick Harker, will participate in a roundtable discussion on monetary policy at 11:00 am Eastern time.
Heading into the start of the trading day on Wall Street, futures tied to the S&P 500, which ended the quarter down 3.65%, are indicating a 2 point opening bell decline while those linked to the Dow Jones Industrial Average are priced for a 29 point pullback.
The tech-focused Nasdaq, which closed out the quarter down 4.12%, is looking at a 25 point boost.
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