Futures Dip Amid Economic Emergency Talks and Rising Treasury Yields

U.S. stock index futures showed a decline in volatile trading on Wednesday as investors reacted to a CNN report stating that President-elect Donald Trump is considering a national economic emergency declaration. This speculation, combined with increasing Treasury yields, put additional pressure on riskier stocks.

As of 7:34 a.m., Dow E-minis dropped by 119 points, translating to a 0.28% decline. Meanwhile, S&P 500 E-minis were down by 26.25 points or 0.44%, and Nasdaq E-minis experienced a decline of 134.5 points, equating to 0.63%.

The futures market lost earlier gains after the report suggested that declaring an economic emergency would enable Trump to implement a new tariff program through the International Economic Emergency Powers Act. This act permits the president to control imports during a national emergency.

Concerns have been growing surrounding potential tariffs on U.S. trade partners, amplifying fears that Trump's policies, such as mass deportations and tariffs, could lead to a global trade war and increase inflation pressures.

Equity gains were further hampered by a rise in Treasury yields, with the yield on the benchmark 10-year Treasury bond reaching 4.7%, marking its highest point in eight months at a time when stock valuations are reportedly stretched.

Investors now turn their attention toward the ADP National Employment Report for December and the weekly jobless claims data, both scheduled for release before the market opens. Additionally, comments from Fed Governor Christopher Waller are also anticipated, providing further insights into the labor market.

This upcoming data could offer indications of what to expect from Friday's important non-farm payrolls figures.

Minutes from the Federal Reserve's December meeting are set to be released at 2:00 p.m. ET, which may provide further clarity regarding the central bank's monetary policy stance for the year. Market analyst Achilleas Georgolopoulos noted, "It would be interesting to see how concerned Fed members really are about the inflation outlook, potentially justifying the significant revisions in the December inflation projections, and whether the December rate cut was a compromise between the hawks and doves ahead of Trump's second presidency."

On the previous trading day, major indexes on Wall Street finished lower. Both the S&P 500 and the technology-focused Nasdaq recorded their most significant daily declines since the Fed's December meeting, where a cautious approach to future interest rate cuts was shared.

Recent economic data highlighting a strong labor market and robust service activities prompted investors to shift expectations for the Fed's first rate cut to June, after which it is anticipated the central bank will maintain rates for the rest of the year, according to the CME Group's FedWatch Tool.

Political considerations are also prominent for investors as they brace for potential policy changes following Trump's upcoming inauguration.

In premarket trading, Advanced Micro Devices saw a drop of 2.6% following a downgrade from brokerage HSBC, which revised the stock's rating to "reduce" from "buy."

In the quantum computing sector, stocks had significant declines: Rigetti Computing dropped by 22%, IonQ by 13.6%, and Quantum Computing experienced a loss of 25.3% after Nvidia’s CEO Jensen Huang mentioned that computers utilizing this emerging technology might be up to 30 years away from practical use.

Conversely, Tapestry saw a rise of 1.2% after Barclays upgraded the luxury brand's rating to "overweight" from "equal weight."

The earnings season is on the horizon, and major banks such as JPMorgan Chase & Co and Wells Fargo are expected to lead the way next week with their quarterly updates.

Lastly, it's important to note that markets will be closed on Thursday in observance of a national day of mourning for former President Jimmy Carter.

Futures, Treasury, Trump