Stock Futures Muted After a Losing Session, Bond Yields Rise

Stock Futures Muted After a Losing Session, Bond Yields Rise

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Key Takeaways

• Futures pressured ahead of President Biden’s speech on new economic plan
• Treasury yields rise on recovery prospects, while Covid-19 cases spike again

US equity futures are trading flat to slightly negative on Wednesday following a weak performance on Tuesday. The Dow Jones Industrial Average slipped from its record highs yesterday amid renewed concerns over rising interest rates.

On Tuesday, all three major indexes closed in red territory. The drop, however, was limited and the Dow lost 0.31%, or 104.41 points, to end the session at 33,066.96. The S&P500 finished at 3,958.55, down 0.32%, or 12.54 points. The Nasdaq Composite was more contained, down 0.11%, or 14.25 points, to a close at 13,045.39.

The Dow Jones Industrial Average could not keep up with the recent gains that lifted it to a record high on Monday as the index was pressured by rising interest rates. The 10-year Treasury yield hit a 14-month high in the early trading hours. The benchmark bond yield reached 1.776%, a level that was last seen in January last year but then subsided to 1.714% in afternoon trading. The 30-year Treasury yield also inched lower as the session came to a close and gravitated towards 2.374%.

Bond yields this year have been a primary concern for investors as they keep going higher prompted by reopening expectations on the back of a successful Covid-19 vaccine program across the states. The latest move in yields comes ahead of today’s appearance of President Joe Biden who will reveal the details surrounding his new recovery package. The infrastructure plan, with a price tag expected to land north of $3tn, will aim to provide a strong boost to the US economy by injecting fresh spending in a swathe of sectors.

The new spending package is adding to the already existing concerns of inflation which could come as a result of a swifter economic rebound. Inflation fears began to mount earlier in the month when President Biden signed off on the $1.9tn stimulus relief bill that is now being distributed among businesses and individuals.

Vaccination speed up, followed by a spike in cases

Meanwhile, the vaccination pace remains strong with an average of 2.7 million doses administered per day for the last seven days. However, coronavirus infections are also on the rise, averaging more than 66,000 per day, on a seven-day average. On that issue, Dr Anthony Fauci, Mr Biden’s chief medical advisor, said the recent rise is not caused only by new Covid-19 variants but also by the premature reopening of some states which eased travel and business restrictions around mid-March.

Prior to the renewed climb of Covid-19 cases that spiked to over 70,000 on Monday, the US was seeing a steady decline of infections between Mar 10 and Mar 23 when cases plateaued below 60,000 and even reached 30,000 in some days. Yesterday, the US reported at least 948 new coronavirus deaths and 61,752 new cases, bringing the weekly average to 66,022 cases per day, a 20% increase from the average two weeks earlier. In total, the US now has more than 30,410,00 people who have been infected with the virus.