S&P 500 futures slipped early Tuesday as the 10-year Treasury yield pushed to its highest level since 2007 and oil prices climbed on a stalled US-Iran negotiation. Traders now price in a more than 72% chance the Federal Reserve raises rates again in October, adding pressure on equities already contending with a global bond selloff.
S&P 500 futures fell 0.1% Tuesday morning, extending Monday's losses on Wall Street. The retreat came as the 10-year Treasury yield briefly pushed above 5.27%, its highest level since 2007.
Oil and yields squeeze risk appetite
Brent crude climbed back above $106 a barrel, with no clear breakthrough in the US-Iran negotiations that have kept energy markets on edge. The mix of climbing oil and yields is stoking concern that inflation could stay stickier than central banks want it to be.
Adding to that theme, the Reserve Bank of Australia raised its cash rate to 4.60% earlier, with policymakers signaling that some upside inflation risks are materializing. European benchmarks were mixed at the open, with Germany's DAX down 0.2% while the UK's FTSE rose 0.3%.
Fed rate-hike odds climb into October
Traders now price in a more than 72% chance of another Fed rate hike at the central bank's October meeting, according to the CME FedWatch tool. That follows a 12-0 vote by the Federal Open Market Committee earlier this month to raise its benchmark rate by 25 basis points.
This week's data calendar could move those odds further: the August JOLTS report, the core PCE index and the quarterly GDP print are all due, alongside the monthly nonfarm payrolls report.
The pressure extends well beyond the US. Two-year Treasury yields have surged almost 60 basis points in September, the biggest monthly jump since early 2023, as investors reposition for a bond market where rates stay higher for longer.
Sources: CNBC, InvestingLive, Investing.com
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