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Happy Wednesday. Stock futures were mixed, as Wall Street awaited the release of a key inflation indicator after Treasury yields advanced to fresh multidecade highs.
Markets closed lower on Tuesday, paring steeper losses earlier in the session as rising Treasury yields pressured equities.
The 30-year Treasury bond yield crossed 5.6% on Tuesday, reaching levels not seen since June 2002, while the 10-year yield climbed to a fresh 2007 high near 5.3%.
Treasury yields fell in European trading on Wednesday, the Wall Street Journal reported, after Federal Reserve speeches lowered market expectations for interest-rate hikes. European government-bond yields followed suit.
“Wall Street dipped as rising yields at the long end weighed on stock valuations heading into several days of high-powered US economic data,” Kyle Rodda, senior financial market analyst at Capital.com, said.
“The sluggish trade came despite a meaningful drop in crude prices as the Trump administration announced a fresh release from the Strategic Petroleum Reserve to put downward pressure on energy costs.”
Rodda said markets continue to fret about rising funding costs across the globe, “as an unfortunate mix of supply and demand pressures lead to expectations of a global economy running above capacity and plagued by persistent inflation.”
The personal consumption expenditures price index, which measures changes in prices for consumer goods and services, is scheduled to be released today at 8:30 a.m. ET.
“The inflation situation in the US will be brought into focus today with the latest release of the Fed’s preferred inflation gauge,” Rodda said. “PCE Index data for August is published and is expected to show well above target and sticky price pressures in the US economy.”
Annual headline and core PCE are forecast to remain unchanged from a month earlier at 3.7% and 3.3%, respectively, he said.
Perhaps more problematically, Rodda added, the core month-over-month figure is tipped to edge higher to 0.3% — or around 3.6% annualized.
“Currently, the markets ascribe about a 50% chance of another hike from the Fed in October — the odds plunged overnight after some relatively dovish Fed speak — with this data poised to either boost those odds or flatten them out in the event of a downside surprise,” he said.
