US Stock Futures Rebound, But Economic Uncertainty Persists

Key Takeaways

• Tech stocks were particularly affected by higher yields on Tuesday
• Concerns about the economy being pushed towards a recession as a result of higher interest rates
• Federal Reserve officials consider rate hikes and suggest they could soon be halted
• Fed Chairman Jerome Powell cautions that the central bank’s fight against inflation is not yet finished

Overview

Following a decline in the major averages due to higher bond yields, U.S. stock futures are trading higher in Wednesday’s pre-market session.

At 04:19 GMT, blue chip Dow Jones Industrial Average futures are trading at 32702.00, up 114.00 or +0.35%. Benchmark S&P 500 futures are at 4018.00, up 16.50 or +0.41% and the tech-heavy NASDAQ Composite futures are trading at 12774.00, up 41.50 or +0.33%.

Tech stocks were particularly affected by the higher yields on Tuesday, with the Nasdaq Composite falling for a second consecutive day by 0.45%, and the S&P 500 and Dow Jones Industrial Average also experiencing losses of 0.16% and 0.12%, respectively.

Investors expressed concern that the economy could be pushed towards a recession as a result of higher interest rates, with the yield on the 2-year U.S. Treasury note rising above 4%, impacting interest-rate sensitive tech stocks.

US Treasury Yields Increase as Banking Crisis Concerns Ease and Investors Evaluate Economic Outlook

US Treasury yields rose due to reduced concerns about a banking crisis and investors evaluating the potential outlook for the US economy and Federal Reserve policy decisions.

The 10-year Treasury yield increased by over 1 basis point, while the 2-year Treasury yield increased by nearly 8 basis points, affecting interest-rate sensitive tech stocks.

The Federal Reserve Governor discussed the banking sector turmoil, indicating that the Fed would investigate its risk testing and assessment procedures.

While Fed officials considered the turmoil prior to raising interest rates, Fed Chairman Jerome Powell cautioned that the central bank’s fight against inflation was not yet finished.

Some investors are concerned that maintaining high interest rates could lead to a recession.

Fed Speakers and Economic Data in Focus This Week, Nasdaq Performance Uneven

This week, Fed speakers will provide new insights into the economy and policy plans, while the latest personal consumption expenditures price index will be released on Friday.

The Nasdaq appears to be up, but only the top quintile saw an increase in performance, according to Dan Greenhaus.

Federal Reserve Vice Chair Michael Barr will address bank failures before the House Financial Services Committee on Wednesday.

Pending home sales data, expected to show a decline in February, will also be released on Wednesday.

Wednesday’s Early Outlook

U.S. stock futures are trading higher in the pre-market session on Wednesday after a decline due to higher bond yields.

Tech stocks were particularly affected on Tuesday by the rising yields, with the Nasdaq Composite falling for a second consecutive day.

Investors are concerned that the pace of rate hikes and maintaining rates at higher levels for a long time could lead the U.S. economy into a recession.

However, throughout the week, new Fed insights and economic data are expected, with Fed speakers providing new insights into the state of the economy and policy plans, and the release of the latest personal consumption expenditures price index on Friday.

Traders are also anticipating the release of pending home sales data on Wednesday, which is expected to show a decline of 3% in February, compared to a rise of 8.1% the previous month.

Overall, the stock market outlook remains uncertain and subject to fluctuations based on economic data and policy decisions.