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Dow Futures Rebound After Fed-Triggered Slump: 10-Year Treasury Yields Spike

Global stocks hit a four-week low in overnight trading, but Wall Street futures look for a solid Monday rebound amid growing uncertainty over the Fed's near-term policy aims.

The Monday Market Minute

  • Global stocks mixed as investors struggle to digest market signals echoing from last week's Federal Reserve policy meeting.
  • Benchmark 10-year note yields slump to 1.345% overnight, before rallying to 1.47% as bond markets struggle to translate reaction to last week's hawkish Fed turn.
  • Value stocks, hammered by last week's market action, pace a potential Monday rebound, but volatility gauges ticker higher as uncertainty grips stocks.
  • Bitcoin tumbles below $33,000 as China crackdowns on mining operations, 
  • CDC data shows 149.6 million Americans have now been fully vaccinated against the coronavirus, with around 318 million doses administered as of Thursday.
  • U.S. equity futures suggest a firmer open on Wall Street heading into a quiet week of data releases but an active slate of Fed speakers, including Congressional testimony Tuesday from Chairman Jerome Powell.

U.S. equity futures rebounded firmly Monday, while Treasury bond yields rallied following a weekend slump and commodity prices continued to retreat, as markets around the world struggle to digest a series of mixed signals from last week's Federal Reserve meeting. 

Market volatility has spiked notably since the Fed indicated a hawkish outlook for near-term interest rates last week, and St. Louis Fed President James Bullard revealed that the central bank is already talking about when to slow the pace of its $120 billion in monthly bond purchases.

The hawkish turn took its toll on value stocks last week, which led declines on Wall Street and pushed stocks in Asia into heavy overnight losses as bond yields retreated, commodity prices slumped and investors worries that if the Fed were to play "catch-up" on rates, and move too quickly to normalize, it would slow near and medium-term growth prospects. 

Benchmark 10-year note yields are still trading sharply lower last week's levels after the Fed statement at 1.47%, but found firm favor after hitting a February trough of 1.354% in overnight trading. 

That's giving stocks at least some support to start the week, with futures contracts tied to the Dow Jones Industrial Average indicating a 215 point opening bell gain, while those linked to the S&P 500 are priced for a 17 point move to the upside.

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Nasdaq Composite futures are also looking at a firmer start, but the tech-focused benchmark is only expected to rise by 28 points, suggesting investors aren't tempted by the lull in bond yields to rotate into growth stocks.

The CBOE's  benchmark volatility gauge, the VIX, is trading just over 20 points and near to the highest levels in a month, a move that also indicates a great deal of uncertainty heading into a week bereft of data that could define market direction and a host of Fed speakers -- including Congressional testimony from Chairman Jerome Powell on Tuesday -- that traders and investors will use to fill in the blanks in their near-term strategies.

In other markets, Bitcoin prices slumped below the $33,000 mark in overnight trading amid another crackdown on mining operations in China, with last week's collapse of the DeFi Titan Finance token still echoing through global cryptocurrency markets.

Oil prices were moving in the opposite direction, however, as the U.S. dollar gave back some of last week's gains against it global currency peers and investors put les faith in a near-term breakthrough in nuclear talks between Washington and Tehran. 

WTI futures for July delivery were marked 42 cents higher at $72.08 per barrel while Brent contracts for April rose 36 cents to $73.87 per barrel.

European stocks were tightly tracking Wall Street futures in early Frankfurt trading, with the Stoxx 600 rising 0.3%, paced by a 0.5% gain for the DAX performance index in Germany. 

Overnight in Asia, however, stocks slumped heavily in the wake of last week's sell-off on Wall Street, with the Nikkei 225 down 3.29% to close at 28,010.93 points and the region-wide MSCI ex-Japan index marked 1.04% lower heading into the final hours of trading.