S&P 500 futures fall 0.4% as rate hike expectations intensify

U.S. stock futures declined to start the second half as traders boosted bets for further interest-rate increases this year.

S&P 500 futures fell 0.4% in early European trading as traders boosted bets for further rate increases, with Fed Chairman Kevin Warsh set to speak at the ECB Forum in Sintra. Nasdaq 100 futures slid 0.55%, while Dow Jones Industrial Average futures lost 0.4%.

"The market has yet to attract sufficient buying interest to establish that level as support," analysts at Saxo Bank said, referring to gold's failure to hold above $4,000 an ounce. The precious metal fell 14% during the second quarter, its worst quarterly performance since 2013.

The two-year Treasury yield hit a one-week high of 4.181%, while the 10-year yield rose 4.3 basis points to 4.464%. The dollar strengthened, pushing the yen to a fresh 40-year low against the greenback and increasing speculation about intervention from Japanese authorities. Gold futures slid 1.6% to $3,974 an ounce, while Bitcoin dropped to a 21-month low of $57,775.

Thursday's nonfarm payrolls report — economists expect a 110,000 to 115,000 increase — will provide the next major test for rate expectations. A stronger-than-expected print would likely reinforce bets on further tightening, while a miss could trigger a relief rally across equities and bonds.

The selloff in futures followed a mixed session Tuesday that trimmed the S&P 500's June losses. The benchmark index rose 0.8% to 7,499.36, while the Nasdaq composite climbed 1.5% to 26,213.72 and the Dow added 136 points to 52,319.20. Nvidia rose 2.6%, providing the biggest boost to the S&P 500, though the AI sector broadly remained under pressure after a month-long rotation out of high-flying technology names. The majority of stocks within the index fell, underscoring the narrowness of the rally.

European equities opened lower, with the Stoxx 600 slipping 0.5%. Banking and utilities stocks led declines, while defense shares gained. Germany's DAX fell 0.1%, France's CAC 40 lost 0.4%, and London's FTSE 100 declined 0.4%. Asian markets were mixed: South Korea's Kospi dropped 2%, Japan's Nikkei 225 rose 0.6%, and China's Shanghai Composite added 0.45%.

Dollar Strength Pressures Yen, Gold, Bitcoin

The dollar's advance extended across asset classes, with the DXY index rising 0.16% to 101.35. The yen's slide to a 40-year low dragged other currencies lower, with the euro and sterling also weakening. Oil prices were little changed, with Brent crude nudging up 0.2% to $73.10 a barrel and WTI futures rising 0.1% to $69.58, as U.S. envoys arrived in Qatar for talks on implementing an initial deal to end the war with Iran.

NFP Data Looms as Next Catalyst

Thursday's jobs report will be the focal point for the remainder of the week. The eurozone's flash CPI estimate, due later Wednesday, adds another layer of macro data for traders to digest, with headline inflation expected to have decelerated to 3% in June from 3.2%.

This article is for informational purposes only and does not constitute investment advice.