U.S. stock futures on Monday fell back from close to 11-week highs as hopes for easier China COVID restrictions pushed up bond yields.
How are stock-index futures trading
-
S&P 500 futures
ES00,
-0.40%
dipped 13 points, or 0.3%, to 4062 -
Dow Jones Industrial Average futures
YM00,
-0.37%
fell 99 points, or 0.3%, to 34360 -
Nasdaq 100 futures
NQ00,
-0.24%
eased 26 points, or 0.2%, to 11984
On Friday, the Dow Jones Industrial Average
DJIA,
rose 35 points, or 0.1%, to 34430, the S&P 500
SPX,
declined 5 points, or 0.12%, to 4072, and the Nasdaq Composite
COMP,
dropped 21 points, or 0.18%, to 11462.
What’s driving markets
U.S. equity futures were starting the week on a soft note as better news of out of China helped nudge bond yields higher.
The S&P 500
SPX,
was in line to open just shy of 11-week highs as investors continued to parse the prospects for further rate rises by the Federal Reserve in the wake of a strong U.S. jobs report released on Friday.
Hong Kong’s Hang Seng index
HSI,
jumped 4.5% after Beijing signaled further easing of COVID restrictions, raising hopes China’s economy can grow faster.
“The effect on the economy of the zero-COVID rules has been underlined by the latest Caixin PMI data showing activity in the services sector shrunk to six month lows. Investors are largely looking beyond this bleak snapshot, buoyed by the weekend’s relaxation of rules and clinging onto hopes that there will be a further softening of strict pandemic policies,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
The news of China’s less draconian COVID rules lifted industrial commodities such as copper
HG00,
and U.S. crude oil
CL.1,
the latter little impacted by the decision over the weekend by OPEC+ to maintain production levels.
The prospects of more robust activity in the world’s second biggest economy is damping demand for sovereign debt and pushing yields higher. The 10-year Treasury yield
TMUBMUSD10Y,
was up 3.6 basis points to 3.531%
The increase in benchmark borrowing costs was helping contain demand for stocks on Monday, with some analysts also noting that techinical factors may hobble a rally that has seen the S&P 500 (SPX) rise 13.8% from its 2022 low hit in mid October.
Jonathan Krinsky, chief market technician at BTIG, noted that though stocks were benefiting from lower Treasury yields in recent months, the S&P 500 remained within its downtrend, and the CBOE VIX index
VIX,
a measure of expected market volatility, was now at the levels sometimes associated with trader complacency.
Source: BTIG.
“The SPX once again finds itself at downtrend resistance around 4,100 with VIX below 20. 10yr yields are back to key support at 3.50%. We expect both of these levels to hold, but wonder if yields break under 3.50% if it would be viewed as equity friendly as the move from 4.25% to 3.50% was?” said Krinsky.
U.S. economic updates set for release on Monday include the final November S&P U.S. services PMI, due at 9:45 a.m., followed at 10 a.m. by the ISM services index for November and the October factory orders. All times Eastern.
There will be no Fed speakers until after its policy-setting meeting on Dec. 14.
