U.S. equity futures retreat as tech comes under pressure as bond yields climb

U.S. equity futures were heading for a weaker session on Friday as technology bore the brunt of losses from major indices as Treasury yields rose on the expectation that Federal Reserve hikes are likely to continue.

  • Futures contracts on the Dow Jones Industrial Average YM00,
    fell about 200 points, or 0.5%, to 33,784

  • Futures on the S&P 500 ES00,
    fell 33.75 points, or 0.7%, to 4,253.

  • Futures contracts on the Nasdaq 100 NQ00,
    fell 128.75 points, or 0.9%, to 13,394.

  • On Thursday, the S&P 500 SPX,
    rose 0.2% to 4,283.74, the Dow Industrials DJIA,
    rose less than 0.1% to close at 33,999.04 and the Nasdaq Composite COMP,
    gained 0.2% to end at 12,965.34.

    What drives the markets?

    Friday will be devoid of major data, leaving investors to ponder last week’s economic updates and hawkish comments from at least one Fed official on Thursday.

    Treasury yields notably climbed on Friday as investors returned to the idea that the Fed’s hikes weren’t quite over, with that of the 10-year yield TMUBMUSD10Y,
    up 5 basis points to 2.913% and the 2-year TMUBMUSD02Y,
    up 3 basis points to 3.238%.

    St. Louis Fed Chairman James Bullard told the Wall Street Journal he would “lean toward” a 75 basis point hike at the central bank’s next policy meeting on Sept. 20-21. On the same day, investors heard more cautious comments from Kansas City Fed President Esther George, who said the speed at which the increases will occur remains up for debate.

    Richmond Fed President Tom Barkin will speak at 9 a.m. EST. Investors are also focused on next week’s Jackson Hole symposium, with Federal Reserve Chairman Jerome Powell and other central bank officials due to speak.

    Opinion: The Fed Isn’t Cool About Fighting Inflation, So Stop Misreading Its Minutes

    Interest-rate-sensitive tech stocks looked poised to bear the brunt, with Nasdaq futures falling, the Nasdaq Composite index set for a weekly decline of 0.6%, while the S&P 500 clings to positive territory, after both indexes ended last week with a fourth-outright win, their longest weekly streak since November 2021.

    “It’s abundantly clear that the Fed’s main objective is to reduce inflation, even as it recognizes the risk of derailing the economy,” said Richard Hunter, head of markets at Interactive Investor.

    “The market still expects a 0.5% interest rate hike in September, although there are growing fears that another 0.75% hike is on the cards, with rates currently set to peak at 3.5%. Separate comments from several Fed officials suggested there was some way to go before victory could be declared on containing inflation,” Hunter said.

    This week’s data revealed flat retail sales and disappointing results from some major retailers, such as Target TGT,
    and KSS from Kohl,
    but Thursday brought data showing weekly jobless claims falling by 2,000 to 250,000, with no signs of mass layoffs.

    Economic leader and manufacturer of Deere & Co DE tractors,
    will report before the market opens.

    In other markets, investors were also selling rough, with West Texas Intermediate CL.1 rough,
    for September down 1.1% to $89.43 a barrel, and Brent BRN00,
    1.2% to $95.41 a barrel.

    Which companies are targeted?
    • Bed, bath and beyond BBBY,
      shares fell 41% after investor Ryan Cohen confirmed he had sold his entire stake in the retailer and made a profit of more than $58 million.

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