U.S. Stock Futures Rise as Treasury Yields Decline

2 Mins read

Stock-index futures in the U.S. are showing a positive trend, while the market awaits earnings reports from Microsoft and Alphabet.

How stock-index futures are trading

  • S&P 500 futures (ES00) rose by 12 points or 0.3% to 4254.
  • Dow Jones Industrial Average futures (YM00) increased by 46 points or 0.1% to 33113.
  • Nasdaq 100 futures (NQ00) climbed by 64 points or 0.4% to 14776.

Yesterday’s performance

On Monday, the Dow Jones Industrial Average (DJIA) experienced a decline of 191 points or 0.58%, settling at 32936. Meanwhile, the S&P 500 (SPX) dropped by 7 points or 0.17% to 4217. In contrast, the Nasdaq Composite (COMP) saw a gain of 35 points or 0.27%, closing at 13018.

Optimism regarding benchmark borrowing costs

Investors remain hopeful that the recent surge in benchmark borrowing costs has reached its peak, which is contributing to the support of stocks early on Tuesday.

The 10-year Treasury yield (BX:TMUBMUSD10Y) declined by 3.3 basis points to 4.817%. This decrease follows its earlier rise to a 16-year high above 5% at the beginning of the week.

This retreat in yields was primarily influenced by hedge fund Pershing Square’s manager, Bill Ackman, who closed his bet against 30-year Treasury bonds. He cited “too much risk in the world to remain short bonds at current long-term rates” and noted that “the economy is slowing faster than recent data suggests.”

Furthermore, Bill Gross, former bond chief at Pimco, added to the bond market rally by stating his expectation of a U.S. recession starting by the end of the year. He has made bets on a fall in interest rates as a reflection of this forecast.

Equity Rally and Corporate Earnings in Focus

The recent surge in Treasury yields has sparked interest among both well-known and lesser-known buyers, according to Jim Reid, a strategist at Deutsche Bank. However, this rise in yields has also resulted in a 3.6% decline in the S&P 500 over the past five days, causing concern among technical analysts who observe that the stock barometer has fallen below its 200-day moving average.

To revive the equity rally, analysts believe that not only must yields continue to decline, but additional support will be required from the ongoing third quarter corporate earnings season. Mark Newton, the Head of Technical Strategy at Fundstrat, suggests that this week might witness a stabilizing effect as approximately one-third of the S&P 500 is set to report earnings.

Companies such as Coca-Cola, General Electric, 3M, and General Motors are among those scheduled to release their results before the opening bell on Wall Street. Following the close of trading, Microsoft, Alphabet, Visa, and Texas Instruments will disclose their earnings.

In addition to these market events, Tuesday will also see the release of the S&P flash services and manufacturing PMIs for October, which are scheduled for 9:45 a.m. Eastern time.

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