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Dow Futures Edge Higher Amid Trump Impeachment Drama; Treasury Yields Extend Bond Market Selloff

Wall Street looks set to claw back some of Monday's losses, but markets will remain focused on a worrying rise in Treasury bond yields that could blunt the current risk-market rally.

The Tuesday Market Minute

  • Global stocks inch higher in cautious trading, with markets tracking political drama in Washington and noting the ongoing rise in U.S. Treasury bond yields.
  • House Speak Nancy Pelosi will move forward which impeachment procedures Wednesday amid reports that VP Mike Pence will not invoke the 25th Amendment to remove President Trump from office.
  • Benchmark 10-year Treasury yields rise to a fresh 10-month high of 1.156% overnight, extending the bond market sell-off that has investors focused on global interest rates.
  • Bitcoin rebounds from Monday's bear market slump, adding 9% to trade past $36,000 as crypto volatility grips markets.
  • Oil nears 11-month highs ahead of EIA and API reports, with WTI crude passing $53 dollars per barrel.
  • Fourth-quarter earnings reports start this week with numbers from JPMorgan, Citibank and Wells Fargo on Friday.
  • U.S. equity futures suggest modest opening bell gains Tuesday ahead of Redbook retail sales data at 8:55 am Eastern time.

U.S. equity futures edged higher Tuesday, pulling global stocks out of Monday's selloff, as markets continue to focus on political developments in Washington and a worrying rise in Treasury bond yields linked to government spending plans.

House Democrats have vowed to push forward with articles of impeachment against President Donald Trump this week following reports that suggest Vice President Mike Pence won't move to invoke the 25th Amendment and remove him from office.

However, with only seven full days remaining until President-Elect Joe Biden's inauguration, Trump near-term exit seems unlikely, and Democratic efforts on impeachment could stall or complicate some of Biden's early ambitions, including a new fiscal stimulus package he has hinted will be worth 'trillions of dollars'.

That pledge, alongside earlier spending agreements from the last Congress, has rattled bond markets for weeks, pushing benchmark 10-year Treasury note yields some 30 basis points higher to a ten-month high of 1.161% in overnight trading.

Last night's moves were also linked to comments from Atlanta Federal Reserve bank president Raphael Bostic, who said he was not "super concerned" about the rise in longer-term yields and didn't think the Fed would need to track it too closely.

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Stocks, in fact, could face a series of tests this week beyond the rise in Treasury yields that could set the tone for this year's early bull market. At least eight companies will launch IPOs this week, lead by Poshmark and Petco Health, in an effort to raise around $5 billion and extend last year's run of successful new listings.

Big bank earnings on Friday, as well, including fourth-quarter updates from JPMorgan Chase  (JPM) - Get JP Morgan Chase & Co. Report, Citigroup  (C) - Get Citigroup Inc. Report and Wells Fargo  (WFC) - Get Wells Fargo & Company Report will be in sharp focus this week, as will key retail sales data for the month of December. 

Early indications Tuesday, however, suggest some modest risk appetite, with futures contracts tied to the Dow Jones Industrial Average suggesting a 78 point opening bell gain and those linked to the S&P 500 priced for an 11 point advance. Contacts tied to the Nasdaq Composite are indicating a 58 point gain for the tech-focused benchmark.

The U.S. dollar index slipped 0.06% against a basket of its global currency peers to 90.411, while Bitcoin added 9% in overnight trading to rise by $36,000 after yesterday's nearly 20% plunged. 

In other markets, oil prices climbed closet to an 11-month high in overnight trading ahead of U.S. inventory data that could show a fifth consecutive week of declines, adding to price pressures brought by Saudi Arabia's surprise output cut and bets on stronger energy demand over the first half of the year.

WTI contracts for February jumped 69 cents to $52.94 per barrel, while Brent futures for March added 77 cents to $56.43 per barrel.

European stocks were mixed in early trading, with the Stoxx 600 rising 0.15% and Britain's FTSE 100 falling 0.35% in the opening hours of trading, while Asian markets nudged modestly higher, highlighted by a fresh 30-year high for the Nikkei 225 in Tokyo.