Stock-futures rally stalls as Treasury yields nudge higher ahead of ADP jobs data

U.S. stock futures were slightly softer early Wednesday as the latest rally stalled with bond yields nudging higher.

How are stock-index futures trading

  • S&P 500 futures
    dipped 3 points, or 0.1%, to 4503

  • Dow Jones Industrial Average futures
    fell 8 points, or 0%, to 34880

  • Nasdaq 100 futures
    eased 28 points, or 0.2%, to 15388

On Tuesday, the Dow Jones Industrial Average
rose 293 points, or 0.85%, to 34853, the S&P 500
increased 64 points, or 1.45%, to 4498, and the Nasdaq Composite
gained 239 points, or 1.74%, to 13944.

What’s driving markets

The government bond market continues to have stocks on a tight leash. A pick up in Treasury yields
early Wednesday is pressuring equity index futures after Tuesday’s strong rally.

The S&P 500 closed the previous session at a three-week peak after Treasury yields slid sharply in response to signs of a softening labor market and waning consumer confidence.

Indeed, the stock benchmark is up 2.2% over the past three trading days — moving back above its 50-day moving average — as the 10-year Treasury have shed nearly 15 basis points over that period. Equities have tended to rise of late when implied borrowing costs fall. Declining yields also make bonds relatively less attractive.

“Yesterday was a typical ‘bad news is good news’ day. Risk sentiment in the U.S. and across the globe was boosted by an unexpected dip in U.S. job openings to below 9 million jobs in July, the lowest level in more than two years, and an unexpected fall in consumer confidence in August,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“The weak data pushed the Federal Reserve hawks to the sidelines, and bolstered the expectation of a pause in September, and tilted the probabilities in favor of a no hike in November, as well,” she added.

Traders will be keen to see whether the ADP report on private sector employment during August, due for release at 8:15 a.m. Eastern, confirms or confounds this narrative. More important data catalysts, the PCE inflation index and nonfarm payrolls report, will be published Thursday and Friday respectively.

Other U.S. economic updates set for release on Wednesday include the revision of second quarter GDP and the advanced reading of trade balance in goods, retail and wholesale inventories for July. Pending home sales in July will be published at 10 a.m. Eastern.

The main corporate focus on Wednesday is likely to be the results of Salesforce
which are due after the closing bell. PC maker HP
offered a cautious outlook late on Tuesday.

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