Wall Street futures edged lower on Thursday as investor sentiment was dampened by uncertainty over the Federal Reserve’s interest rate policy ahead of key economic data releases.
Major tech stocks such as Alphabet (NASDAQ
), Microsoft (NASDAQ
), and Nvidia (NASDAQ
) saw pre-market declines of 0.4% to 0.8%, continuing their losses from the previous day. This drop coincided with Treasury yields hovering above 4.5% for the second consecutive day, the highest levels since early May.
The combination of monetary policy uncertainty and substantial new Treasury issuances has driven bond yields higher, putting pressure on stocks. Higher bond yields often signal expectations for increased interest rates, leading to more expensive financing and narrower profit margins for companies.
Investors are keenly awaiting the second estimate of first-quarter GDP, due at 8:30 a.m. ET, with expectations set at a 1.3% growth rate, slightly below the initially reported 1.6%, according to a Reuters poll. Additionally, jobless claims data is anticipated to show 218,000 new filings for state unemployment benefits, up from 215,000 the previous week.
The S&P 500 index is on track for its largest weekly drop in six weeks, and the Dow closed at a four-week low on Wednesday. Current market expectations, as indicated by the CME Group’s (NASDAQ
) FedWatch Tool, suggest the Fed’s first 25-basis-point rate cut may occur in November or December.
Berenberg analysts noted, “Given the robust economy, the Fed is not yet satisfied with the current level of inflation, and there is no immediate rush to cut interest rates. We maintain our view that the Fed will not begin the rate-cutting cycle until December.”
The upcoming personal consumption expenditures report for April, the Fed’s preferred inflation measure, could further influence predictions about the timing of the Fed’s rate cuts. Meanwhile, hawkish comments from Fed policymakers have also affected risk sentiment, with investors awaiting remarks from New York Fed President John Williams and Dallas Fed President Lorie Logan later today.
As of 7:08 a.m. ET, Dow e-minis were down 329 points (0.85%), S&P 500 e-minis were down 20.5 points (0.39%), and Nasdaq 100 e-minis were down 56 points (0.30%).
In corporate news, Salesforce (NYSE
) shares plummeted 15.5% after the company forecasted second-quarter profit and revenue below analyst expectations due to weak client spending on cloud and enterprise business products.
Conversely, HP (NYSE
) shares rose 4.9% following better-than-expected second-quarter revenue results. Tesla (NASDAQ
) saw a 0.9% increase after Reuters reported that the company was preparing to register its ‘Full Self-Driving’ software in China.
Retailer American Eagle Outfitters (NYSE
) fell 7.4% after reporting disappointing quarterly revenue impacted by inflation, while Dollar General (NYSE
) gained 6.3% following upbeat first-quarter sales. However, Kohl’s (NYSE
) slumped 22% after cutting its annual sales and profit forecasts.
Moderna (NASDAQ
) shares increased by 2.7% on news that the U.S. government is close to funding a late-stage trial of its bird flu vaccine.
Additionally, the transition to faster trade settlements for securities in the U.S. has been largely smooth, despite some initial processing challenges reported by market participants.
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