Stock futures experienced a slight decline on Sunday night after a positive week, despite a noticeable increase in Treasury yields which reached levels not seen in years.
Specifically, futures for the Dow Jones Industrial Average dropped by 97 points, which is about 0.2%. Similarly, both the S&P 500 futures and Nasdaq-100 futures also fell by 0.2%.
The rise in oil prices affected equity futures early in trading. Brent crude surged over 1%, reaching $105.86 per barrel, while West Texas Intermediate futures rose approximately 1% to $93.20. This increase followed President Trump’s rejection of ceasefire terms put forth by Iran.
Last week was fairly positive for the markets, with the Dow managing a 0.3% gain, breaking a three-week downward trend. Meanwhile, the S&P 500 and Nasdaq Composite recorded their best weekly performances since early August, climbing by 1.2% and 2.1%, respectively.
Technology stocks were at the forefront of these gains. For instance, Meta Platforms saw a notable nearly 13% increase, largely attributed to excitement around the company’s Muse AI agent. Microsoft rose more than 4%, and both Apple and Nvidia increased by over 1% as well.
These advancements occurred even as Treasury yields reached heights not seen in years. Investors are increasingly anticipating more rate hikes from the Federal Reserve, spurred on by ongoing inflation concerns. The yield on the benchmark 10-year Treasury note hit a level not recorded since 2007, while the yield on the 30-year bond reached its highest point since 2004. Additionally, the yield on the 2-year note spiked by about 17 basis points last week.
Research president Ed Yardeni noted that the swift increase in 2-year government note yields worldwide indicates that major central banks may need to raise policy rates due to inflation driven by elevated oil prices from the renewed tensions in the Middle East. He added that these higher rates could worsen the outlook for significant government deficits globally.
This week will keep rates in the limelight, as a series of important economic reports are anticipated. The personal consumption expenditure price index for August, which is the Federal Reserve’s preferred measure of inflation, is set to be released on Wednesday. Also upcoming are new U.S. manufacturing statistics on Thursday and the highly anticipated September jobs report on Friday.
