Oct 1 (Reuters) – Dow futures slipped to a more than three-month low on Thursday as concerns over inflation and rising government debt drove Treasury yields to multi-decade highs, while blowout results from Micron lifted the chip stocks.
Stock moves over the last few weeks have been in lockstep with bond yields as equity traders try to assess the Federal Reserve’s monetary policy path against the backdrop of higher energy costs due to the Middle East conflict adding to price pressures.
Efforts by the Treasury department to halt the selloff by increasing long-term bond buybacks have not helped much as developed markets in Europe and Japan come under grip of debt worries.
Yields on 10-year notes and 30-year bonds hit their highest since 2002, at 5.32% and 5.66%, respectively, a day after benchmark Treasuries logged their worst quarter since 1994.
Analysts have said faith in the AI trade is what has avoided sharper selloff in US equities compared with peers in Europe, with results from Micron Technology reinforcing that sentiment.
The high-bandwidth memory chipmaker forecast quarterly revenue above market expectations and said customers had increased commitments under its supply agreements to $32 billion.
The stock, however, dipped about 1% in premarket trading, reflecting heightened investor expectations from a company whose shares have more than tripped in value this year.
Broader stocks in the sector, however, gained. Lam Research and Applied Materials added 1.8% each, while Nvidia and Advanced Micro Devices were up about 1% each.
Alphabet advanced 2.3% after announcing its Gemini 4 flagship AI model.
At 04:48 a.m. ET, Dow E-minis were down 267 points, or 0.52%, and S&P 500 E-minis were down 1.5 points, or 0.02%. Nasdaq 100 E-minis were up 88 points, or 0.29%.
The CBOE’s VIX index, seen as Wall Street’s fear gauge, hit a two-week high and was last at 16.84 points.
Wall Street had a rocky September with the S&P 500 and Dow logging monthly declines in what has historically been a weak month for equities. However, AI enthusiasm helped the Nasdaq log gains.
Wednesday’s softer-than-expected inflation data has tempered expectations of an interest-rate hike later this month, with traders seeing a 63% chance of a hold, according to the CME Group’s FedWatch Tool.
But with the indicator still above the 2% central bank target, a December rate hike is still on the cards.
Commentary from policymakers such as Thomas Barkin, Christopher Waller, Philip Jefferson, Michelle Bowman and Lorie Logan could offer markets more insights on the policy path.
On the data front, a weekly report on jobless claims and the Institute for Supply Management’s indicator for manufacturing activity are due later in the day.
(Reporting by Johann M Cherian in Bengaluru; Editing by Arun Koyyur)
Comments