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U.S. equity futures moved lower Monday, while Treasury yields and the dollar resumed their recent climb, as investors looked to a busy week on Wall Street that could stoke inflation concerns and add further pressure to the recent global stock slump.
The S&P 500 is now running a two-week losing streak, with the benchmark down 0.93% for the year, following a hotter-than-expected December jobs report that, alongside the uncertainty tied to the new administration of President-elect Donald Trump, has triggered renewed inflation worries.
Benchmark 10-year Treasury bond yields have largely lead the market’s concern, rising to a November 2023 high of 4.801% in overnight trading, with 2-year notes rising 17 basis points since the start of the year to trade at 4.424%.
“Stocks are struggling to gain traction in the new year. Recent signs of inflation pressure and reduced expectations for Federal Reserve rate cuts have pushed rates to uncomfortably high levels, complicating the macro backdrop,” said Adam Turnquist, chief technical analyst at LPL Financial.
“Unfortunately, near-term technical trends point to additional upside risk for Treasury yields,” he added. “Based on this backdrop and the current technical setup for the broader market, we believe a deeper pullback remains potentially on the table as market breadth and momentum wane.”
Fed Chairman Jerome Powell and his colleagues will be closely tracking inflation and consumer spending data this week.
ANDREW CABALLERO-REYNOLDS/AFP via Getty Images
The march higher in yields, which both change the calculation for broader stock prices while offering an attractive, risk-free alternative rate for global investors, is set to face further upward pressure this week in the form or December inflation and retail sales figures as well as the unofficial start of the third quarter earnings season.
Around 20 S&P 500 companies will report fourth quarter updates this week, including JPMorgan Chase (JPM) , Goldman Sachs (GS) , Bank of America (BAC) and UnitedHealth Group (UNH) .
On the macro front, economists are looking for a modest uptick in both core and headline inflation readings for the month of December, while record holiday shopping and travel is likely to lift retail sales close to the $730 billion mark.
Heading into the start of the trading day on Wall Street, stocks are looking at another sharply lower open with futures contracts tied to the S&P 500 suggesting a 47 point opening bell decline.
Related: Bonds hammer Fed rate cut bets as inflation greets Trump White House
Futures linked to the Dow Jones Industrial Average, meanwhile, are priced for a 150 point decline while the Nasdaq, which is down 0.77% for the month, is called 245 points lower.
Stocks on the move include Nvidia (NVDA) , which was last marked 3% lower in premarket and set to open at $131.82 each, a move that would drag the market’s second-largest stock into correction territory.
The markets benchmark volatility index, the VIX, is also on the move, rising 20.37% in after-hours trading to $21.74, the highest in nearly a month. At that level, investors are expecting daily swings of around 1.36%, or 79 points, for the S&P 500 over the next 30 days.
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In overseas markets, Wall Street’s Friday slump is dragging markets lower, with Europe’s Stoxx 600 benchmark falling 0.77% in Frankfurt, with higher oil prices keeping the FTSE 100’s decline to around 0.22% in London.
Overnight in Asia, Japan’s Nikkei 225 closed 1.05% lower in Tokyo while the regional MSCI ex-Japan index was marked 181% lower into the final hours of trading.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
