U.S. stock futures drifted slightly lower after rallying on Tuesday, as investors cheered upbeat developments on discussions between Russia and Ukraine.
Contracts on the S&P 500 declined. The blue-chip index had risen for a fourth consecutive day and closed at its highest level since January earlier Tuesday, unwinding some losses for the year-to-date. Technology stocks led the way higher and helped pull the Nasdaq Composite up by nearly 2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}. As of Wednesday morning, the CBOE Volatility Index, or VIX, held below 20, or near its lowest level in more than two months.
U.S. crude oil prices rose for the first time in three sessions Wednesday after dipping earlier this week amid signs of progress in Russia-Ukraine talks. Russia said it was easing military action in Ukraine’s capital Kyiv and northern city Chernihiv and was prepared to set a meeting between Russian President Vladimir Putin and Ukraine’s President Volodymyr Zelenskyy following a draft peace agreement.
Meanwhile, investors nervously eyed a flattening U.S. Treasury yield curve, with longer-duration bond yields falling much more sharply than those on the short end as traders bet on higher rates from the Federal Reserve in the near-term and mulled a murky macroeconomic outlook over the longer-term. The benchmark 10-year yield edged higher Wednesday morning and topped 2.4{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}.
The spread, or difference, between the 2-year and 10-year Treasury note yields — a closely watched part of the yield curve which has typically inverted ahead of recessions — narrowed to its lowest level since 2019 earlier this week. (It inverted for a few seconds on Tuesday.)
“It is still a pretty accurate indicator [of a recession] if we go back and look at history, but I have to give you a few caveats,” Kristina Hooper, Invesco chief global market strategist, told Yahoo Finance Live on Tuesday. “First of all, it needs to invert for some time, typically three months, to be a very accurate indicator. Second, it’s a longer-term indicator. So usually after the yield curve inverts, it takes about 18 months on average for a recession to occur. And it is a terrible, terrible sell signal, because typically stocks have room to run and do run significantly higher after a yield curve inverts.”
The latest batch of U.S. economic data offered a mixed picture on the state of the economy amid still-elevated inflation, ongoing geopolitical uncertainty and tightening monetary policy out of the Federal Reserve. Job openings held little changed at about 11.3 million in March, far outpacing new hires at 6.7 million to reflect persistently rampant labor supply shortages. And while the Conference Board’s latest monthly index showed a slight uptick in consumer confidence in March, the index remained below last year’s average. Plus, consumers’ one-year inflation expectations soared to an all-time high of 7.9{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}.
“We expect a clear downshift in inflation expectations in the second half of the year, but they could easily rise further in the near-term,” Ian Shepherdson, chief U.S. economist for Pantheon Macroeconomics, wrote in a note Tuesday.
“The survey sends mixed signals on the state of the economy but, always, remember that sentiment is not the same as spending, which is what matters,” he added.
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7:30 a.m. ET: Stock futures decline after S&P 500 posts four straight days of gains
Here’s where markets were trading Wednesday morning:
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S&P 500 futures (ES=F): -10.5 points (-0.23{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 4,615.00
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Dow futures (YM=F): -77 points (-0.22{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 35,113.00
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Nasdaq futures (NQ=F): -50.25 points (-0.33{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 15,187.50
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Crude (CL=F): +$2.79 (+2.68{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to $107.03 a barrel
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Gold (GC=F): +$10.60 (+0.55{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to $1,928.60 per ounce
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10-year Treasury (^TNX): +1.3 bps to yield 2.413{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}
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7:20 a.m. ET: Mortgage applications fall for third straight week as mortgage rates rise by most in 11 years
U.S. mortgage applications fell for a third consecutive week last week, with refinances especially coming under pressures as mortgage rates jumped by the most in over a decade.
The Mortgage Bankers Association’s (MBA) weekly index showed a 6.8{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} decrease in application volume for the week ended March 25. This followed a drop of 8.1{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} for the prior period, and coincided with a rise in the 30-year fixed-rate mortgage to 4.8{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}, from 4.5{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} previously. That marked the biggest weekly increase since 2011 to bring rates to their highest level since the end of 2018.
Refinances fell by 15{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} compared to the prior week and slumped 60{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} over the same period last year. On an unadjusted basis, purchases were still higher by 1{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} week-on-week, but down by 10{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} compared to the same week last year.
“Mortgage rates jumped to their highest level in more than three years last week, as investors continue to price in the impact of a more restrictive monetary policy from the Federal Reserve. Not surprisingly, refinance application volume declined further, as fewer borrowers have an incentive to apply at rates that are significantly higher than a year ago,” Mike Fratantoni, MBA senior vice president and chief economist, said in a press statement.
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6:12 p.m. ET Tuesday: Stock futures open slightly lower
Here’s where the major stock index futures opened Tuesday evening:
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S&P 500 futures (ES=F): -4.75 points (-0.1{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 4,620.75
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Dow futures (YM=F): -24 points (-0.07{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 35,166.00
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Nasdaq futures (NQ=F): -15.5 points (-0.1{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 15,222.25
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.
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