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Dow Futures Lower Ahead of Biden Infrastructure Plan; Bond Yields Rise

Treasury yields are on pace for their biggest quarterly rise in 5 years as inflation concerns cloud growth prospects ahead of President Biden's address in Pittsburgh.

The Wednesday Market Minute

  • Global stocks mixed as investors await details of a key infrastructure spending plan from President Joe Biden while keeping a close eye on U.S. Treasury bond yields.
  • Biden will unveil details of what could be a $4 billion, multi-year stimulus plan later today in Pittsburgh.
  • Benchmark 10-year note yields hold at 1.74% ahead of Biden's speech and ADP jobs data report. 
  • Banks stocks drift lower in Europe and Asia amid uncertainty linked to the costs linked to the implosion of the Archegos Capital hedge fund.
  • CDC data shows 53.4 million Americans have now been fully vaccinated against the coronavirus, with more than 147.6 million doses administered as of Tuesday.
  • U.S. equity futures suggest a softer open on Wall Street after the ADP National Employment Report and second quarter earnings from Walgreens.

U.S. equity futures suggest a mixed open on Wall Street Wednesday with investors awaiting details on a key infrastructure spending plan from President Joe Biden while keeping a close eye on Treasury bond yields amid renewed concerns for faster inflation.

Biden will unveil his "Build Back Better" deal in a speech later today in Pittsburgh, with reports suggesting he'll outline a spending package worth as much as $4 trillion, paid for by an increase in corporate taxes, that will include a $2.25 trillion infrastructure spending plan.

The massive injection of cash, alongside this year's $1.9 trillion American Rescue Act and the $900 billion coronavirus aid package passed late last year, would mark one of the most significant increases in U.S. spending -- and debt -- in at least a generation. And while the stimulus would undoubtedly boost both domestic and global growth prospects, investors are also worried about the prospect of faster inflation along with it.

Benchmark 10-year Treasury note yields, which hit a 14-month high of 1.776% yesterday, were holding at around 1.74% in early Wednesday trading, while the dollar index eased against a basket of its global peers to trade at 93.115.

U.S. equity futures, meanwhile, look set for a relatively flat open, with traders eyeing both the rise in Treasury yields -- which are on pace for the biggest quarterly advance in five years -- and the implications of the Archegos Capital hedge fund implosion for the financial sector, which JPMorgan analysts have estimated could be as much as $10 billion.

Futures contracts tied to the Dow Jones Industrial Average suggest a 30 point opening bell decline, while those linked to the S&P 500 are priced for a modest 6 point move to the upside. 

Nasdaq Composite futures suggest a modest gain of around 80 points for the tech-focused benchmark, with pre-market moves largely tracking 10-year Treasury bond yields. 

European stocks were also mixed, with the Stoxx 600 inching closer to the all-time high it reached last year before the pandemic with a 0.14% gain and Britain's FTSE 100 falling 0.25% on the back of weakness for bank stocks amid the uncertainty linked to Archegos Capital. 

Asia stocks slipped lower, however, with financial stocks pacing the declines even after a stronger-than-expected set of PMI data from China which showed solid growth in both factory and non-manufacturing output this month, putting the economy well on pace to meet its 6% annual GDP growth target. 

Japan's Nikkei 225 slipped 0.86% lower on the final trading day of its fiscal year to close at 29,178.8 points while the region-wide MSCI ex-Japan benchmark fell 0.35% into the close of trading.

Global oil prices were also modestly lower after a technical committee reporting to OPEC cartel members trimmed their global demand forecast by 300,000 barrels for this year amid the uncertainty of post-pandemic demand. OPEC will hold its formal monthly meeting tomorrow from its headquarters in Vienna.

WTI contracts for May delivery were marked 24 cents lower at $60.81 per barrel while Brent contracts for the same month fell 30 cents to $63.34 per barrel.