Futures Dip Amid Economic Concerns and Rising Treasury Yields

By Johann M Cherian and Sukriti Gupta

(Reuters) - U.S. stock index futures experienced a decline during volatile trading on Wednesday. This dip followed a CNN report indicating that President-elect Donald Trump is considering declaring a national economic emergency. Additionally, an increase in Treasury yields further pressured riskier stocks.

As of 7:34 a.m., Dow E-minis were down by 119 points, or 0.28%, while S&P 500 E-minis fell by 26.25 points, or 0.44%, and Nasdaq E-minis dropped by 134.5 points, or 0.63%.

Futures relinquished earlier gains after the report detailed that Trump’s potential move could enable him to implement a new tariff program under the International Economic Emergency Powers Act. This act grants the president authority to manage imports during national emergencies.

Concerns about possible surcharges on U.S. trade partners have created unease in the market. Investors are wary that the president's policies, such as mass deportations and increased tariffs, may ignite a global trade war and lead to rising inflationary pressures.

Adding to the pressure on equities was a rise in Treasury yields, with the yield on the benchmark 10-year Treasury bond hitting 4.7%. This level is the highest it has been in eight months, occurring at a time when equity valuations are already considered high.

Upcoming economic indicators are set to capture attention, including the ADP National Employment Report for December and weekly jobless claims data, both released before market opening. The comments from Fed Governor Christopher Waller will also be significant.

This forthcoming data may provide insights into what to expect from Friday’s important non-farm payroll numbers. Market players are also keen to see the minutes from the Fed's December meeting scheduled for 2:00 p.m. ET, which could clarify the central bank's monetary policy view for the year ahead.

Market analyst Achilleas Georgolopoulos at brokerage XM noted, "It would be interesting to see how concerned Fed members really are about the inflation outlook, potentially justifying the significant revisions in the December (Personal Expenditure) inflation projections, and whether the December rate cut was a compromise between the hawks and doves ahead of Trump’s second presidency."

In the previous session, Wall Street's main indexes recorded losses, with the benchmark S&P 500 and tech-heavy Nasdaq experiencing their largest declines since the Fed’s December meeting. This downturn followed data showing a robust labor market and positive services activity, prompting investors to postpone expectations for the Fed's first rate cut until June.

Political concerns remain dominant among investors as they brace for policy shifts after Trump’s impending inauguration.

Among notable premarket activities, Advanced Micro Devices fell by 2.6% after being downgraded from "buy" to "reduce" by brokerage HSBC. Quantum-computing stocks also suffered; Rigetti Computing dropped by 22%, IonQ fell by 13.6%, and Quantum Computing lost 25.3%. This decline followed comments from Nvidia's CEO Jensen Huang, who stated that practical quantum computers are likely 30 years away.

Tapestry saw a rise of 1.2% after Barclays upgraded the luxury brand from "equal weight" to "overweight."

Looking ahead, the earnings season is set to begin next week, with major banks like JPMorgan Chase & Co and Wells Fargo expected to release their quarterly updates.

It is worth noting that the markets will be closed on Thursday in observance of a national day of mourning for former President Jimmy Carter.

Futures, Trump, Treasury