Dow Futures Are Mixed, But Treasury Yields Leap on Stimulus Bets As Talks Show Progress

Treasury bond yields hit a four-month high overnight as lawmakers narrow their differences on a potential $2 trillion-plus coronavirus stimulus bill.
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The Wednesday Market Minute

  • Global stocks mixed as investors look for a breakthrough on stimulus talks in Washington.
  • President Donald Trump suggests he's willing to back a larger coronavirus relief bill, while Senate leader Mitch McConnell seems ready to bring any agreement to the floor later this week.
  • House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin will continue talks later today.
  • Benchmark 10-year Treasury note yields hit four-month high of 0.818% on bets of near-term deal, will the dollar index falls 0.3% against its global currency peers.
  • Oil prices fall after a surprise build in domestic U.S. crude stocks, which stand at 490.6 million barrels, with Energy Department data due at 10:30 am Eastern time.
  • Wall Street futures suggest a modestly weaker open ahead of earnings from Verizon, Abbott Labs and Biogen.

U.S. equity futures edged lower Wednesday, but a jump in Treasury bond yields, as well as pullback for the U.S. dollar, suggest investors are preparing for a potential breakthrough on stimulus from lawmakers in Washington later this week.

Comments from President Donald Trump Tuesday triggered the jump, which lifted benchmark 10-year Treasury note yields to a four-month high of 0.818% in overnight dealing, when he told Fox & Friends that he would be willing to accept a coronavirus relief bill that was higher than the $2.2 trillion agreed by House Democrats.

With House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin ready to resume talks today, and Senate Leader Mitch McConnell reportedly willing to bring any agreed deal to the floor, the chances of a pre-election boost to the stalled economy looked to have improved notably over the past 24 hours.

Equity futures, however, are still primed for a modest retreat Wednesday, given that Senate Republicans may still reject a comprehensive deal so close to the November 3 elections -- especially with Trump trailing his Democratic rival, Joe Biden, in every major national poll -- and that a busy week of corporate earnings, including big-tech reports Amazon  (AMZN) - Get Report, Microsoft  (MSFT) - Get Report and Tesla  (TSLA) - Get Report, are slated for the coming days.

Futures contracts tied to the Dow Jones Industrial Average suggest a 30 point opening bell decline for the benchmark, while those linked to the S&P 500 are indicating a 3.5 point pullback.

The U.S. dollar index was also in retreat, falling 0.43.% to a seven week low of 92.65 against a basket of its global currency peers as investors bet that higher spending -- be it agreed this week or after the November elections -- will erode the value of the greenback over the longer term. 

European stocks were also affected by currency moves Wednesday, and trading deeply in the red, despite what looks to be a positive advance in talks between Brussels and London over a post-Brexit agreement on trade.

A firmer euro, however, which rose to 1.1856 against the weaker greenback held down gains for export focused-stocks and pulled the Stoxx 600 into a 0.9% decline by mid-day trading in Frankfurt , while a similar jump in the pound, to 1.3039, saw the FTSE 100 decline 1.25% in London.

Global oil prices, meanwhile, headed south again Wednesday following data from the American Petroleum Institute last night which showed a surprise 584.000 barrel increase in domestic crude stocks last week, taking the total to around 490.6 million. 

WTI contracts for November delivery, the U.S. benchmark, traded 72 cents lower from their Tuesday close in New York and were changing hands at $40.98 per barrel in early European dealing while Brent contracts for December, the global benchmark, were seen 72 cents lower at $42.44 per barrel.

Asia stocks, however, bucked the global trend, rising a weaker dollar -- and softer energy prices -- to modest Wednesday gains on hopes of a near-term breakthrough on stimulus and reports that AstraZeneca's U.S.-based coronavirus vaccine trial, which has been halted since September 6, is ready to resume in the coming days.

Tokyo's Nikkei 225 gained 0.31% to close at 23,639.46 points while solid moves in Taiwan and South Korea boosted the MSCI ex-Japan benchmark to a 0.29% advance heading into the final hours of trading.