Dollar Surge Rattles U.S. Stock Futures

The interest rate on the 10-year Treasury note has reached the highest level it has been in 16 years.

On Thursday, the futures for U.S. stock indexes saw a substantial decrease. The opening of the Dow Jones Industrial Average was expected to be down by 200 points. This decline was influenced by rising Treasury yields and a stronger U.S. dollar, causing additional pressure on the stock market.

How are stock-index futures trading

• The ES00 symbol for S&P 500 futures saw a decline of 37 points, representing a 0.8% decrease, resulting in a value of 4409.
• The Dow Jones Industrial Average futures, represented by the symbol YM00, experienced a decline of 203 points or 0.6%, resulting in a final value of 34522.
• The NQ00 symbol for Nasdaq 100 futures went down by 191 points, representing a 1.3% decline, and settled at a value of 14,957.

Yesterday, the Dow Jones Industrial Average (DJIA) fell by 77 points or 0.22% to a level of 34,441. Similarly, the S&P 500 (SPX) experienced a decrease of 42 points or 0.94% to reach 4,402. Additionally, the Nasdaq Composite (COMP) witnessed a decline of 209 points or 1.53%, with a closing value of 13,469.

What’s driving markets

Based on the Federal Reserve’s recent statement, it seems probable that U.S. stocks will persist in their decline, as the intention is to keep interest rates higher for a longer duration. Additionally, it is anticipated that there will only be one more rate hike within the year.

The Federal Reserve’s projections, known as the “dot plot,” and the hawkish comments made by Powell during the press conference, had an impact in driving up Treasury yields to their highest level in 16 years and causing the US dollar to reach its highest value in more than six months. These factors were viewed as detrimental to the stock market.

The rise of the US dollar was additionally supported by the Bank of England’s choice to maintain the current interest rates on Thursday.

Moreover, American investors analyzed fresh economic data on Thursday. The number of people in the United States who applied for jobless benefits fell to 201,000 in the previous week, reaching the lowest level in the past eight months.

After the press conference on Wednesday, Stephen Innes, who is a managing partner at SPI Asset Management, remarked that Powell’s suggested policies appeared to have a significantly negative impact on the American stock market.

In a note, it was noted by Innes that the narrative has changed, with interest rates hitting record highs and affecting the stock markets. This connection between interest rates and the stock markets leads to a more intricate trading atmosphere, as any rise in rates brings a certain amount of disturbance to the American equity market.

The interest rate on the 10-year Treasury note, with the ticker symbol BX:TMUBMUSD10Y, rose to 4.474%. This increase of 10 basis points marked its highest level since late 2007. It is important to note that bond prices and yields have an inverse correlation. Additionally, the ICE U.S. Dollar Index DXY, which gauges the strength of the dollar against a selection of other currencies, climbed by 0.5$, reaching a value of 105.63.

Companies in focus

• Before the market opened, there was a 5% rise in shares of FedEx Corp. (FDX) after the company revealed a better projection for its full-year profit. Although FedEx experienced a decline in shipping demand and sales, it was able to improve its financial performance by implementing strategies to reduce costs.
• Klaviyo Inc. (stock ticker KVYO) had a successful trading debut with a 9.2% increase, but later experienced a 3% decline in its stock price.
• Despite exceeding expectations and providing a full-year revenue guidance that surpasses estimates, KB Home’s stock experienced a 2% decline in after-hours trading.