Nasdaq futures fall 1.2% as Treasury yields surge

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Nasdaq futures fall 1.2%

Highlights

Nasdaq-100 futures fell 1.20%, S&P 500 futures 0.69%, and Dow futures 0.44%.
The 10-year Treasury yield surged to 5.139%, its highest level since July 2007.
Markets priced in a greater than 75% chance of another Fed rate hike in October.

Nasdaq-100 futures were down 1.20%, at 30,397, according to the latest market data provided. S&P 500 futures fell 0.69%, to 7,718.75, while Dow futures lost 0.44%, to 51,646. The decline extended the risk-off trend after Treasury yields reached multiyear highs, CNBC reported.

Treasury yields reset rate expectations

The benchmark 10-year Treasury yield reached 5.140%, its highest level since July 2007. The two-year yield climbed to 4.897%, the highest since 2023, while the 30-year yield reached a post-2004 high of 5.438%.

Those moves followed strong U.S. business-activity readings and renewed inflation concerns. Higher fuel and transportation costs are adding to price pressures, while resilient economic activity gives the Fed more room to keep monetary policy restrictive.

Fed funds futures showed traders assigning a greater than 75% probability to another rate increase in October, up from roughly 49% a week earlier.

The pressure was already evident in Wednesday’s cash session. The S&P 500 fell 0.8%, while the Nasdaq Composite lost 1.1%, ending a four-session winning streak.

Energy prices add another risk

Oil strengthened alongside bond yields, complicating the inflation outlook. Brent crude is holding above $100 a barrel, while West Texas Intermediate crude remains above $93.

The combination of higher energy prices and elevated Treasury yields presents a difficult backdrop for equities. Rising yields increase the discount rate applied to future corporate earnings and can make bonds more competitive with stocks, an especially important consideration for highly valued technology companies.

The weakness also spread beyond U.S. markets. Mainland China’s CSI 300 closed 1.73% lower and Australia’s S&P/ASX 200 declined 0.66%, while Japan’s Nikkei 225 gained 1.66%. European stocks opened lower, with the Stoxx 600 down about 0.4%.

Rates become the market test

Thursday’s selloff puts the interest-rate outlook back at the center of equity trading. Investors had already absorbed the Fed’s first rate increase since 2023, which lifted its target range to 3.75%-4%.

The next question is whether resilient economic activity and higher energy costs will require another move. With the 10-year yield above 5% and Nasdaq futures down 1.2%, markets are showing increasing sensitivity to that possibility.

Earlier, we reported that bond markets slide as rate outlook shifts.

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