Dow Jones futures fell more than 200 points as US stocks entered the red on Wednesday, after a rise in Treasury yields unnerved investors already considering whether the latest data will change the direction on interest rates.
Dow Jones Industrial Average (YM=F) and S&P 500 (ES=F) futures fell 0.6%, after a lackluster session. Futures on the Nasdaq 100 (NQ=F) fell roughly 0.7%.
Stocks are selling off as investors weigh a jump in US bond yields after a failed government debt auction, reflecting concerns that the Federal Reserve will keep interest rates high for longer. These concerns appear to outweigh hopes for the growth of artificial intelligence, which has lifted the Nasdaq to a record high in the course of Nvidia's (NVDA) post-earnings rally.
The yield on the five-year Treasury note rose on Tuesday to its highest levels in almost four weeks, while the yield on the 10-year Treasury note (^TNX) surpassed the key level of 4.5%. On Wednesday, the benchmark yield rose further to trade around 4.56%.
Investors are trying to figure out what stronger-than-expected consumer confidence data on Tuesday means for Federal Reserve policy making, but they are bracing for a long wait for the pivot to rate cuts after a series of warnings from bank officials.
Read more: How does the labor market affect inflation?
The release of the Fed's Beige Book later Wednesday may shed more light ahead of Friday's reading on personal consumption expenditures, the central bank's preferred measure of inflation.
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