Stock index futures in the U.S. were affected by the uncertainty surrounding the duration of elevated interest rates set by the Federal Reserve. Investors remained cautious as they awaited crucial data that would provide insight into the state of the economy.
Before the start of trading, megacap companies such as Alphabet, Microsoft, and Nvidia experienced slight declines ranging from 0.3% to 0.8%. This was due to the yield on Treasury notes remaining above 4.5% for the second consecutive day, reaching its highest level since May.
The increase in bond yields typically indicates expectations of higher interest rates, which can result in more expensive financing and reduced profit margins for companies.
Investors are particularly focused on the second estimate for first-quarter gross domestic product (GDP), which is expected to be released at 8:30 a.m. ET. According to a Reuters poll, the world’s largest economy is estimated to have expanded by 1.3%, slightly lower than the previously reported 1.6%.
Also on the agenda is the release of jobless claims data, which is expected to indicate that the number of Americans filing for State unemployment benefits has increased to 218,000 from the previous week’s figure of 215,000.
The benchmark S&P 500 index is set to experience its largest weekly decline in six weeks, while the Dow Jones Industrial Average closed at its lowest level in four weeks on Wednesday.
The majority of market expectations for a 25-basis-point interest rate cut have shifted to the last two months of the year due to signs of persistent price pressures, as indicated by the CME Group’s FedWatch Tool.
A recent survey conducted by the central bank revealed that economic activity has continued to expand from early April to mid-May. However, firms have become more pessimistic about the future due to weakened demand and a modest pace of inflation.
The release of April’s personal consumption expenditure report, which is the Federal Reserve’s preferred inflation gauge, on Friday could influence predictions regarding the timing of the central bank’s first rate cut.
Policymakers’ hawkish remarks have also negatively affected market sentiment, and traders will be analyzing the statements of New York Fed President John Williams and Dallas Fed President Lorie Logan later today.
As of 5:37 a.m. ET, Dow e-minis were down by 333 points, or 0.86%, S&P 500 e-minis were down by 23.5 points, or 0.44%, and Nasdaq 100 e-minis were down by 76.75 points, or 0.41%.
Salesforce, a component of the Dow, projected second-quarter profit and revenue below the Street’s estimates due to weak client spending on its cloud and enterprise business products, resulting in a more than 15.5% drop in its shares.
American Eagle Outfitters witnessed an 8.5% decline after reporting lower-than-expected quarterly revenue, as increased inflation adversely impacted demand for its apparel and accessories, which are often sold at full price.
Despite a generally positive earnings season, which has buoyed market sentiment, investors are eagerly awaiting the results from Best Buy, Dollar General, and Kohl’s before the market opens.
Moderna’s stock rose by 4.5% following reports that the U.S. government is close to providing funding for the final phase of the company’s bird flu vaccine trial.
As the United States transitions to faster trade settlements for securities, market participants have encountered some minor processing challenges, but the overall transition has been relatively smooth.
