U.S. stock index futures experienced a decline on Tuesday as a bond selloff pushed Treasury yields higher. This development pressured rate-sensitive stocks while investors braced for a wave of corporate earnings that could provide clearer market direction.
Futures Market Update
As of 5:05 a.m. ET, Dow E-minis fell by 138 points, or 0.32%. S&P 500 E-minis dropped by 21.5 points, or 0.36%, and Nasdaq 100 E-minis were down by 92.5 points, or 0.44%.
Rising Treasury Yields
U.S. Treasury yields increased across the board as investors evaluated the potential impact of the upcoming presidential election on fiscal policy. They are also reassessing how a strong U.S. economy might affect the Federal Reserve’s policy decisions.
The yield on the benchmark 10-year note reached as high as 4.222%, continuing its steady climb since early October. This rise followed a robust jobs report that led investors to reduce expectations for monetary policy easing for the remainder of the year. According to CME’s FedWatch, traders are now pricing in an 89% chance of a 25-basis-point interest rate cut in November.
Impact on Major Stocks
Rate-sensitive megacap stocks fell in premarket trading, with Tesla down 0.7%, Apple decreasing by 0.3%, and Nvidia dropping 0.5%.
Focus on Corporate Earnings
The primary attention remains on corporate earnings, with over 100 companies set to report their results this week. General Motors, 3M, and Verizon are scheduled to announce their earnings before the market opens, while Baker Hughes and Texas Instruments will report after market close.
Analysts at BCA Research expect third-quarter earnings to be strong enough to support hopes for a soft economic landing. They noted that “earnings season will provide useful information on the U.S. economy, consumer spending, and the breadth of earnings growth outside of the mega-cap names.”
Market Context
Stocks pulled back from record highs on Monday as investors took a pause after six consecutive weeks of gains for major indexes, although Nvidia’s performance helped the Nasdaq edge slightly higher.
While indexes have rallied due to positive economic data and a favorable monetary policy outlook, the upcoming weeks are expected to bring volatility to equity markets. Investors will be evaluating earnings reports, new economic data, the results of the U.S. election in two weeks, and a subsequent central bank meeting.
According to LSEG data, estimated year-over-year earnings growth for the S&P 500 in the third quarter is projected at 6.5%, excluding the Energy sector, and 4% overall. Additionally, futures tracking the small-cap Russell 2000, which is sensitive to economic shifts, fell by 0.6%.
Remarks from Philadelphia Fed President Patrick Harker are anticipated later today, which may further influence market sentiment.
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