U.S. stock index futures fell on Wednesday as Treasury yields rose on expectations the Federal Reserve could keep interest rates higher for longer, while a slide in Tesla and Netflix shares was set to weigh on the tech-heavy Nasdaq.
While the start of the earnings season has been largely supportive for equities, investors will be closely watching updates from market heavyweights as well as consumer companies for signs of inflation and economic slowdown hurting margins.
Mixed economic data recently has fueled bets that the U.S. central bank will hike interest rates by 25 basis points in May, with traders giving nearly 85% odds for such a move, as per CME Group's Fedwatch tool. The 2-year Treasury yield , most reflective of short-term rate expectations, hit a one-month high of 4.29% on Wednesday and the 10-year yield hit a four-week high as traders scaled back expectations of rate cuts later this year.
"Although some of the economic indicators suggest the economy is likely to avoid a recession, the fact is that the cost of borrowing is now at such a level as to deter some consumers from financing their debt," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. "This will cause the economy to enter a mild recession, however, it will be only short-lived and may last for a quarter."
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