U.S. equity futures nudged modestly lower Wednesday, following on from the longest winning streak for major stock benchmarks in more than two years, as markets continue to track moves in Treasury bond yields ahead of public remarks from Federal Reserve Chairman Jerome Powell prior to the opening bell.
The S&P 500 notched its seventh consecutive session gain Tuesday, while the Nasdaq ended in the green for eighth straight trading day, as Treasury yields slipped lower following a solid auction of $48 billion in 3-year notes that drew renewed interest from foreign investors.
The better-than-expected sale, which forms part of the Treasury’s newly-increased borrowing slate, eases concerns that a pick-up in new supply would weigh on demand and push yields higher.
The downside Treasury yield moves, which typically result in higher stock prices, also leaned in to a series of comments from Federal Reserve officials that suggested the economy was strong enough, and inflation quick enough, to possibly warrant another rate hike.
“We’re going to continue to need to see tight financial conditions in order to bring inflation to 2% in a timely and sustainable way,” said Dallas Fed President Lorie Logan. “I’m going to be looking at the data and I’m going to be looking at financial conditions as we get closer to the following meeting.”
The CME Group’s FedWatch tool, however, continues to suggest investors are betting on rate cuts over the next six months, rather than rate hikes, and see a lower benchmark lending rate as early as June.
Fed Chairman Jerome Powell could challenge that consensus with public remarks to the Division of Research and Statistics conference in Washington and 9:15 am eastern time today, but is more likely to be more pointed in a policy discussion at the Jacques Polak Annual Research Conference tomorrow afternoon at 2:00 pm eastern time.
Today’s action, then, is likely to focus on the Treasury’s $40 billion auction of new 10-year notes, which are expected to be released at around 1:00 pm eastern time.
Related: Wall Street braced for renewed bond market slump as Treasury debuts beefed-up auction plate
Benchmark 10-year paper was marked little-changed from last night’s levels at 4.575% heading into the New York trading session, while 2-year notes were pegged at 4.945%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.25% on the overnight session at 105.810.
On Wall Street, with earnings from Warner Bros Discovery and Biogen before the bell, and Disney after the close, stocks are set for a muted open following last night’s closed gains.
Futures contracts tied to the S&P 500 are priced for a 3 point opening bell dip while those linked to the Dow Jones Industrial Average suggest a 10 point pullback. The tech-focused Nasdaq is called 3 points lower.
In other markets, global oil prices hovered near three-month lows following data from the American Petroleum Institute that showed am 11.9 billion increase in domestic U.S. stockpiles amid concerns over the pace of demand in a slowing global economy.
Brent futures contracts for January delivery were marked 44 cents lower at $81.16 per barrel while WTI contracts for December fell 47 cents to $76.90 per barrel.
In Europe, the region-wide Stoxx 600 was marked 0.28% lower in early Frankfurt trading, while stocks in Asia were also in the red after failing to catch momentum from Wall Street’s solid close.
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