U.S. equity futures bounced higher Wednesday, following on from the worst single session for stocks since March, thanks in part to a pullback in Treasury bond yields and potential progress in shutdown debates on Capitol Hill.
The S&P 500 slumped to a fresh June low Tuesday, with big-cap tech stocks leading to the downside, as Treasury yields tested new 2007 highs following another round of hawkish comments from Federal Reserve officials and data suggesting troubling weakness in consumer confidence.
The closely-tracked expectations of the Conference Board’s benchmark survey, in fact, fell below the 80 point mark that has historically signaled recession, suggesting the the relentless fun of Fed rate hikes, which have added 500 basis points to borrowing costs, are starting to take their toll on the broader economy.
And with markets betting on more hikes to come, including a 35% chance of a December increase, longer-term Treasury yields are testing new cycle highs, with benchmark 10-year notes hitting 4.56% yesterday before easing to 4.505% in overnight Asia trading.
Benchmark 2-year notes, meanwhile, slipped to 5.05% while the dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.06% higher and near the highest levels of the year at 106.299.
The market’s key volatility gauge, the CBOE’s Vix index, is also trending north, and was last marked 8% higher at a four-month peak of 18.25 points.
Global oil prices were also marching higher ahead of Energy Department data on domestic stockpiles and export rates at 10:30 am Eastern time, with WTI crude futures for November delivery rising $1.46 to $91.85 per barrel.
Still, with the pullback in Treasury yields, and progress in the Senate on a bill that could fund the government through to November 17, stocks are looking for a modestly positive open Wednesday even as the S&P 500, which is down 4% for the third quarter, remains on track for its worst month since March.
Futures contracts tied to the benchmark are indicating a 14 point opening bell gain while those linked to the Dow Jones Industrial Average are priced for a 77 point bump.
The tech focused Nasdaq, which is typically sensitive to Treasury yield moves, is priced for a 58 point advance.
Overnight in Asia, stocks booked modest gains following a better-than-expected reading for industrial profits from China-owned companies, with the MSCI ex-Japan index rising 0.1% into the close of trading.
In Europe, the Stoxx 600 was marked 0.07% lower, and largely tracking moves in U.S. equity futures, while the FTSE 100 slipped 0.32% in early London trading.
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