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U.S. stock futures on Tuesday pointed to a fifth consecutive day of declines as worries about further rate hikes pushed Treasury yields to fresh highs.

How are stock-index futures trading
  • S&P 500 futures

    dipped 30 points, or 0.8%, to 3597

  • Dow Jones Industrial Average futures

    fell 213 points, or 0.7%, to 29047

  • Nasdaq 100 futures

    eased 83 points, or 0.8%, to 10901

On Monday, the Dow Jones Industrial Average

fell 94 points, or 0.32%, to 29203, the S&P 500

declined 27 points, or 0.75%, to 3612, and the Nasdaq Composite

dropped 110 points, or 1.04%, to 10542.

What’s driving markets

Traders’ risk appetite continued to be crushed by concerns the Federal Reserve’s desire to combat rampant inflation with still-higher borrowing costs will hurt economic activity and crimp corporate earnings.

The policy-sensitive 2-year Treasury yield

on Tuesday sat above 4.3%, near its highest level since 2007. The short-duration benchmark was nearly 400 basis points lower a year ago before the Fed embarked on a rate hiking campaign to tackle consumer price rises running at their fastest pace in 40-years. The 10-year Treasury yield

briefly popped above 4% again in early trading.

JPMorgan Chase

CEO Jamie Dimon has warned additional rate rises will be particularly painful, and the S&P 500 could fall by another 20%. The benchmark is already down 24.2% so far in 2022. The tech-heavy Nasdaq Composite has shed 32.6% over the same period and sits at its lowest since July 2020.

“With the U.S. 10-year yield back at the 4% level this morning, we expect the pressure to continue in U.S. equities and our thesis is also that the upcoming Q3 earnings season starting this week will lead to earnings downgrades and disappointments in the outlook,” said Peter Ganry, head of equity strategy at Saxo Bank.

Dimon’s bank on Friday will help kick off the third-quarter corporate earnings season alongside peers Citigroup

and Morgan Stanley
Analysts expect S&P 500 aggregate earnings will grow by 4.5% for the period, though much of this is driven by an expected 6.3% gain for energy stocks, according to Refinitiv. Financials’ earnings are forecast to fall 1.6%.

The market must contend with U.S. producer prices data on Wednesday and the consumer prices data on Thursday, reports that should further impact investors’ thinking on the Fed’s policy trajectory.

“Stay long dollars and stay short risk continue to be heard loudly in virtually every market discussion,” said Stephen Innes, managing partner at SPI Management.

The dollar

has been propelled sharply higher by the Fed’s relatively aggressive rate-hiking cycle, and the buck’s strength is seen as yet another headwind for the earnings of U.S. multinationals.

Indeed, the strong greenback is often taken as a sign of stresses elsewhere, as the Hang Seng

has fallen below 17,000 for the first time since 2011. “The cyclically sensitive semiconductor sector is under pressure, facing headwinds from higher yields, oversupply, and US export controls,” Innes said.

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