Stock futures move lower as Treasury yields climb
U.S. stock futures fell early Thursday after the S&P 500 pulled back from a record and Treasury yields rose to multidecade highs. European and Asian markets also declined. Investors are watching the Treasury’s planned bond sale, PepsiCo’s results and weekly jobless claims, while the coming earnings season offers a potential test of whether company profits can support equities despite higher borrowing costs.
U.S. stock futures move lower early Thursday after the S&P 500 retreated from a record and Treasury yields spiked to multidecade highs, putting investors on alert for further pressure on equities. Dow Jones Industrial Average futures fell 359 basis points, or 0.70%, while S&P 500 futures dipped 0.37% and Nasdaq-100 futures were down 0.53%.
The declines followed a losing session on Wall Street. The S&P 500 fell 0.2%, moving back from an all-time high reached one day earlier. The Dow dropped more than 340 points, or 0.7%, and the Nasdaq Composite slid 0.2%.
Yields are the immediate pressure point.
The 10-year Treasury note yield was last seen 4 basis points higher at 5.3178%, while the 30-year yield rose 4 basis points to 5.7064%. Higher borrowing costs have curbed demand for equities in recent weeks, particularly in market sectors more exposed to financing costs. CNBC reported that industrials was the worst-performing sector week to date.
Bond auction draws strong demand
The Treasury sold $39 billion of 10-year notes on Wednesday. Indirect bidders, including global central banks, bought more than 80% of the auction, above the 10-auction average of 72.4%, CNBC reported. The sale helped the 10-year yield ease from its 24-year high during Wednesday’s session.
The Treasury is scheduled to sell $22 billion of 30-year bonds later Thursday. Investors will be watching the sale as yields remain elevated and markets assess demand for government debt.
Markets outside the United States also fell. In Europe, the pan-European Stoxx 600 was down 0.85% in morning trading. The U.K.’s FTSE 100 lost 0.44%, France’s CAC 40 fell 0.81%, Germany’s DAX dipped 0.77% and Italy’s FTSE MIB shed 0.98%.
Asian markets closed lower. Japan’s Nikkei 225 fell 1.42%, South Korea’s Kospi dropped 2.62%, Australia’s S&P/ASX 200 declined 0.77%, and mainland China’s CSI 300 lost 1.09%. The broad declines show that concerns over higher yields are weighing on markets beyond U.S. shares.
Earnings season in focus
Despite the pullback, some investors remain optimistic that corporate results could help support stocks. FactSet expects the S&P 500 to post blended earnings growth of roughly 30% in the third quarter. If realized, that would mark a third consecutive quarter of growth above 25%.
“If earnings remain strong, and the idea is that they probably will, if expectations are met and/or higher, that is going to sustain this rally — despite the fact that rates are higher,” Courtney Garcia, senior wealth advisor at Payne Capital Management, told CNBC’s “Closing Bell.” “It's not going to derail the market.”
Investors are due to receive results from PepsiCo before the market opens Thursday. Traders are also watching weekly jobless claims data. The figures and earnings report will offer fresh information as markets weigh company performance against the pressure from higher interest rates.
Levi Strauss shares fell almost 2% in extended trading after the retailer lowered its full-year revenue growth guidance, though it raised its profit outlook. The company’s update added a company-specific signal to a session already shaped by interest rates and broader market caution.
For now, the Treasury’s planned 30-year bond sale and the next wave of earnings are the immediate tests facing investors as trading begins.
