U.S. Futures Weaken on Treasury Yields and Fed Uncertainty, Salesforce Dips After Earnings

U.S. stock futures retreated on Thursday, signaling further losses after a prior session decline, as investors grappled with soaring Treasury yields and uncertainty surrounding the Federal Reserve’s potential interest rate cuts.

By early morning trading, Dow futures dropped 0.9%, S&P 500 futures fell 0.5%, and Nasdaq 100 futures slipped 0.6%.

The decline was triggered by escalating Treasury yields, which spiked following weak demand for new U.S. government debt auctions. The benchmark 10-year Treasury yield reached a four-week high of 4.6%, adding to gains from the previous day.

Persistent inflation and recent remarks from Fed officials have also dampened expectations for rate cuts this year. Market sentiment has shifted from anticipating two rate cuts in 2024 to just one by November or December, according to the CME FedWatch Tool.

The upcoming release of the monthly personal consumption expenditures price index (PCE), the Fed’s preferred inflation gauge, later this week could further influence this outlook. Policymakers have emphasized the need for more convincing evidence of cooling inflation before considering interest rate reductions.

In corporate news, Salesforce shares tumbled in extended hours trading after the business software giant reported second-quarter earnings that missed analyst estimates. Additionally, activist investor Nelson Peltz reportedly liquidated his stake in Disney following a failed proxy battle earlier this year.

These developments have contributed to a cautious mood among investors, who are closely watching the evolving economic landscape and Fed policy signals to navigate the uncertain market conditions.