U.S. Stock Futures Slide Amid Rising Bond Yields

by Warren Seah

Stock-index futures performance

  • S&P 500 futures (ES00) dipped 20 points, or 0.4%, to 4502.
  • Dow Jones Industrial Average futures (YM00) fell 119 points, or 0.3%, to 34763.
  • Nasdaq 100 futures (NQ00) eased 95 points, or 0.6%, to 15421.

Previous trading session

In the previous session, the Dow Jones Industrial Average (DJIA) rose 116 points, or 0.33%, to 34838. The S&P 500 (SPX) increased 8 points, or 0.18%, to 4516, while the Nasdaq Composite (COMP) dropped 3 points, or 0.02%, to 14032. Trading was closed on Monday in observance of the Labor Day holiday.

Market sentiment and global economic outlook

U.S. traders are returning from the Labor Day break to a generally risk-off mood in global markets due to disappointing news from China, the world’s second-largest economy.

A recent Caixin survey revealed that China’s service sector expanded at its slowest pace in eight months during August, indicating a faltering post-pandemic recovery.

Additionally, a survey conducted in the eurozone indicated that output in the bloc is contracting at its fastest pace in nearly three years.

The negative sentiment in Asian and European markets has spilled over into U.S. equity index futures.

According to Susannah Streeter, head of money and markets at Hargreaves Lansdown, “Sentiment has turned downbeat again on China as fresh brushstrokes are painted on the picture of its slowing economy.”

Economic Concerns Overshadow Positive News for Property Giant

The data has overshadowed relief that the struggling property giant Country Garden has managed to make key interest payments on its debt, reducing concerns about contagion in the financial sector. China appears to be taking one step forward, but two steps back, as optimism one day turns to pessimism the next.

Concerns About Economic Growth Impact Sovereign Debt Markets

Concerns about economic growth might be expected to support sovereign debt markets, but here too the tone was grim. Treasury yields rising amid concerns recent increases in oil prices – though down a bit on Tuesday — may revive inflationary pressures.

Oil Prices Surge, Bringing New Challenges for Central Banks

Oil prices have surged to reach new highs in 2023, a development poised to have significant repercussions on the upcoming August consumer price index reports. This presents a fresh challenge for central banks as they continue their diligent efforts to bring inflation levels back in line with their desired targets.

Sovereign Bonds Sell-Off Driven by Inflation Expectations

This growing concern has notably impacted sovereign bonds, triggering a sell-off primarily driven by heightened inflation expectations. And, of course, stocks do not like the cut of that new inflation jib.

U.S. Economic Updates Include July Factory Orders

U.S. economic updates set for release on Tuesday include July factory orders, due at 10 a.m. Eastern.

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