U.S. stock futures were retreating before the market opened on Monday. The bounce from the start of the year is quickly fading away.
There are several reasons for the sour mood on Wall Street. The biggest is the recent surge in longer-term bond yields, which is increasing borrowing costs for companies and making stocks less attractive relative to bonds. Renewed talk from President-elect Donald Trump about tariffs and concern from the Federal Reserve that inflation may prove sticky are also weighing on shares.
On Friday, the big data point will be the monthly non-farm payrolls report. A strong number would further shift expectations that the Fed won’t cut interest rates as much as previously thought. A weaker figure might feed optimism that the Fed can continue with a few more rate cuts at the start of the year. For now, the overwhelming consensus is that borrowing costs will stay unchanged at the Fed’s Jan. 30 decision.
Futures for the Dow Jones Industrial Average fell 69 points, or 0.1%. Contracts tied to the S&P 500 sank 0.3%, while futures tracking the tech-heavy Nasdaq 100 retreated 0.4%. Coming into the session, the S&P is up just 0.2% this year, having given up most of the gains from the first few days of trading.
Longer-term borrowing costs are staying higher. The yield on the 10-year U.S. Treasury was at 4.697%, up from 4.629% yesterday and 4.57% at the end of last week. The 2-year note yielded 4.285%, compared with 4.25% last week.
