By Johann M Cherian and Lisa Pauline Mattackal
(Reuters) – Wall Street was on track to open lower on Wednesday, as concerns about the timing and scale of the Federal Reserve's interest rate cuts pushed Treasury yields higher and pressured to mega-cap stocks.
Microsoft (NASDAQ , Alphabet (NASDAQ and Meta (NASDAQ ) fell between 0.7% and 0.8% in pre-market trading as US bond yields across the board rose to highs of almost four weeks (TO US/)
Conflicting expectations about the size and timing of interest rates have kept the market on edge since early this year.
Rising bond yields often reflect expectations of higher interest rates, which means more expensive financing and lower profit margins for companies.
Traders began the year expecting cuts by March, but persistent inflation and hawkish comments from central bankers have lowered expectations to a 25 basis point cut for November or December alone, according to the CME FedWatch tool.
“The Federal Reserve is in a conundrum, with strong growth numbers and yet inflation doesn't seem to respond to anything. Oil prices are also going up and that's also putting some pressure on the market,” said Robert Pavlik, Dakota Senior Portfolio Manager. Wealth Management.
“People are asking, 'What's the reason I'm buying right now?'” Pavlik said.
The , a gauge of Wall Street fear, hit its highest levels since May 3.
The central bank's Beige Book, which will be released on Wednesday at 2:00 pm ET, is expected to shed light on the state of the US economy. Markets will also closely monitor comments from this year's voting policymakers, including New York President John Williams and Raphael Bostic.
But the main focus this week is on Friday's release of personal consumption spending data for April, the Federal Reserve's preferred inflation gauge.
As of 8:26 a.m. ET, they were down 225 points, or 0.58%, down 32.5 points, or 0.61%, and down 126.5 points, or 0.67%.
Futures tracking the Nasdaq led the declines, after the technology index closed above the 17,000 mark for the first time on Tuesday, boosted by gains from Nvidia (NASDAQ ) and other chip stocks.
However, the benchmark ended steady and the Dow Jones closed lower as unexpectedly strong consumer confidence data left market participants doubting the possibility of an imminent start to the policy easing cycle. monetary policy of the Federal Reserve.
marathon oil (NYSE advanced 9.1% after ConocoPhillips (NYSE said it would buy the Houston-based company in an all-stock deal for just over its $15 billion market value.
American Airlines (NASDAQ cut its second-quarter earnings forecast due to weaker pricing power, sending its shares down 8.8%. Other airlines such as Southwest and Delta also fell more than 2 .4% each.
DICK'S Sporting Goods rose 8.2% after raising annual sales and profit forecasts, while Abercrombie & Fitch raised its annual sales growth forecast, sending the retailer's shares up 1.4%.
Generally strong corporate earnings have helped offset worries about rates. Of the 480 S&P 500 companies that reported earnings through Friday, 77.9% beat analyst estimates versus a long-term average of 66.7%, according to LSEG data.
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