US futures drop as increasing Treasury yields cause anxiety

The stock market took a hit on Wednesday as Dow futures plummeted over 200 points, signaling a rough day ahead for US stocks. The decline comes on the heels of a spike in Treasury yields that has left investors feeling uneasy about the future direction of interest rates.

Futures for the Dow Jones Industrial Average and the S&P 500 both fell 0.6%, while contracts for the Nasdaq 100 dropped roughly 0.7%. The sell-off is largely attributed to concerns over rising bond yields following a disappointing government debt auction. Investors fear that the Federal Reserve may opt to keep rates higher for an extended period, dampening hopes for economic growth.

The yield on five-year Treasurys surged to near four-week highs on Tuesday, while the 10-year yield surpassed the key 4.5% level. On Wednesday, the benchmark yield continued to climb, hovering around 4.56%. Investors are closely monitoring economic data, including Tuesday’s stronger-than-expected consumer confidence report, to gauge the Fed’s next move on interest rates.

The release of the Fed’s Beige Book later in the day is expected to provide further insight into the central bank’s thinking ahead of Friday’s reading on PCE, the Fed’s preferred inflation gauge. Despite the market turbulence, some positive news emerged from a survey by the World Economic Forum, which found that chief economists are increasingly optimistic about the global economic outlook for the year.