Stock Market News: Dow Set to Open Down
U.S. stock futures fell on Tuesday as Treasury yields marched higher, with investors closely focused on economic data that could impact the outlook for interest rates amid bets that the Federal Reserve will cut borrowing costs as soon as June.
Futures for the Dow Jones Industrial Average retreated 130 points, or 0.3%, after the index tumbled 240 points on Monday from its all-time high to finish at 39,566. S&P 500 futures fell 0.1% with contracts tracking the tech-heavy Nasdaq down 0.2%. The yield on the benchmark 10-year U.S. Treasury note rose above 4.32%.
Wall Street saw a weak start to quarterly trading on Monday, with the Dow and S&P slipping back from record highs as Treasury yields jumped. Manufacturing data were to blame, with a measure of March activity coming in hotter than expected and pointing to signs of persistent inflation, which rattled investor confidence that the Fed will move soon to cut interest rates from a generational peak.
“The first session of Q2 was a challenging one for U.S. markets. Treasuries saw their weakest session in several weeks as stronger manufacturing ISM data reignited doubts over the extent of Fed rate cuts this year,” noted Peter Sidorov, a Deutsche Bank analyst.
Inflation and interest rates remain dominant themes in markets, with recent strength in stocks coming amid renewed expectations of rate cuts. Treasury yields, which move inversely to Treasury prices, jumped after the latest manufacturing data as investors pared their bets on a June rate cut, with yields heading higher again on Tuesday and adding pressure to stocks.
Economic data will continue to be in focus as traders mull the rate outlook. Investors want to see signs that inflation is moderating and the economy remains resilient, but not running so hot as to temper action from the Fed.
In the spotlight this week is the U.S. jobs report out Friday, but other closely watched indicators and remarks from central bank officials are also due in the interim. Tuesday will see the release of the JOLTS job openings report as well as February factory orders. Fed Governor Michelle Bowman will deliver remarks in the day ahead, as will Cleveland Fed president Loretta Mester and San Francisco Fed president Mary Daly.
“Today’s JOLTS report for February will give…important labour market colour,” wrote Sidorov. “[Fed chairman Jerome] Powell has often referenced the job openings to unemployed ratio when assessing labour market normalisation.”