S&P 500 futures extend losses as Treasury yield nears 5%, Powell speech looms

What’s driving markets

Lingering fears that the Hamas-Israel war may escalate, alongside a spike in benchmark bond yields, continued to weigh on stock markets early Thursday.

“The market sell-off gathered pace over the last 24 hours, as rising geopolitical risks and a fresh surge in long-term borrowing costs added to the downbeat mood,” said Jim Reid, strategist at Deutsche Bank.

The yield on the 10-year U.S. Treasury
BX:TMUBMUSD10Y
moved to within a few basis points of 5%, its highest level since the summer of 2007, as investors expressed concerns that the Federal Reserve will need to keep interest rates higher for longer given the resilience of the U.S. economy and inflation that is still nearly double the central bank’s 2% target.

Traders thus will be keen to hear whether Federal Reserve Chair Jay Powell addresses the latest sharp rise in yields when he delivers comments at the Economic Club of New York, starting at noon.

“Investors are desperate for a bit more clarity on how policymakers view the landscape ahead and want clues on how long they’ve had to wait before cuts are on the cards,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

“He’s expected to stay in a watchful mood, stressing continued vigilance and not becoming complacent when it comes to inflation,” Streeter added.

Other Fed officials making comments on Thursday include Chicago Fed President Austan Goolsbee speaking in Madison, Wisconsin at 1:20 p.m., and Fed Vice Chair for Supervision Michael Barr speaking at a Boston Fed conference at 1:30 p.m..

U.S. economic updates set for release on Thursday include the weekly initial jobless claims report alongside the Philadelphia Fed October manufacturing survey, due at 8:30 a.m. Eastern. Existing home sales and leading economic indicators, both covering September, will be released at 10 a.m.

Meanwhile, the third quarter corporate earnings season moves on, with AT&T
T,
-1.78%,
Blackstone
BX,
-2.88%
and Freeport-McMoRan
FCX,
-2.38%
among those delivering results before Wall Street’s opening bell, followed by Western Alliance Bancorp
WAL,
-1.31%,
CSX
CSX,
-2.23%
and Intuitive Surgical
ISRG,
+0.05%
after the close.

In terms of the wider market the results late Wednesday from Netflix
NFLX,
-2.68%
and Tesla
TSLA,
-4.78%
have pretty much cancelled each other out, with shares in the streaming giant jumping more than 12% on well-received numbers but the electric vehicle maker losing nearly 5% following cautious comments from Elon Musk.