US stock futures fell slightly after a rally on Tuesday as investors cheered positive developments in Russia-Ukraine talks.
Contracts on the S&P 500 fell. The blue-chip index had risen for a fourth straight day and closed early Tuesday at its highest level since January, erasing some year-to-date losses. Technology stocks led the gains, helping pull the Nasdaq Composite up almost 2%. As of Wednesday morning, the CBOE Volatility Index, or VIX, was below 20, or near its lowest level in more than two months.
US crude prices rose for the first time in three sessions on Wednesday, after falling earlier this week on signs of progress in Russia-Ukraine talks. Russia said it was easing military action in the Ukrainian capital Kyiv and in the northern city of Chernihiv and was ready to arrange a meeting between Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy after a draft peace deal.
Meanwhile, investors nervously eyed a flattening US Treasury yield curve, with yields on longer-duration bonds falling much more than those on the short end as traders bet on higher Federal Reserve interest rates in the short-term and reflect on a gloomy macroeconomic outlook the longer term. The benchmark 10-year yield edged higher on Wednesday morning, topping 2.4%.
The spread, or difference between 2-year and 10-year Treasury bond yields — a closely watched part of the yield curve that typically inverts ahead of recessions — narrowed earlier this week to its lowest level since 2019. (It became a few seconds on Tuesday the opposite.)
“It’s still a fairly accurate indicator [of a recession] If we go back and look at history, I have to give you a couple of caveats,” Kristina Hooper, Invesco’s chief global market strategist, told Yahoo Finance Live on Tuesday. “First of all, it usually has to invert for about three months to be a very accurate indicator. Second, it is a longer-term indicator. Therefore, it typically takes about 18 months, on average, after the yield curve has inverted, for a recession to occur. And it’s a horrible, horrible sell signal, because stocks usually have room to move up significantly higher after a yield curve inversion.”
The story goes on
The latest US economic data presented a mixed picture of the economy amid still elevated inflation, ongoing geopolitical uncertainty and the Federal Reserve’s tightening policy. Job vacancies were flat in March at about 11.3 million, far outpacing new hires at 6.7 million to reflect the ongoing rampant labor shortages. And while the latest monthly index from the Conference Board showed a slight increase in consumer confidence in March, the index remained below last year’s average. Also, consumer one-year inflation expectations rose to an all-time high of 7.9%.
“We expect inflation expectations to fall significantly in the second half of the year, but they could rise slightly further in the near term,” Ian Shepherdson, chief US economist at Pantheon Macroeconomics, wrote in a note on Tuesday.
“The survey is sending mixed signals about 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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8:31 am ET: 4Q GDP revised to 6.9% annualized rate, personal consumption at 2.5%
The U.S. economy expanded at a slightly slower pace than previously reported for the final months of 2021, based on the final fourth-quarter revision of gross domestic product (GDP) from the Bureau of Economic Analysis (BEA).
U.S. GDP grew 6.9% quarter-on-quarter in the final three months of 2021, the BEA said on Wednesday. GDP growth of 7.0% was previously reported.
The downward revision of headline GDP came as the BEA cut its personal consumption measure to 2.5% in the fourth quarter, significantly lower than the previously reported rate of 3.1%. Consumer spending accounts for about two-thirds of US economic activity. Nonetheless, the downward revision was partially offset by an upward revision in private inventory investment, which is also a positive contributor to GDP.
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8:16 am ET: Private payrolls rose 455k in March, slightly beating estimates: ADP
US private sector employers brought back slightly more jobs than expected in March as the economy faced persistent labor shortages and widespread job vacancies.
The number of people employed in the private sector rose by 455,000 last month, the ADP said in its latest report on Wednesday. According to Bloomberg data, consensus economists were looking for 450,000 jobs that could be given back. In February, employers returned 486,000 payslips based on ADP’s upwardly revised monthly print.
The ADP report comes two days ahead of the Labor Department’s “official” monthly jobs report for March, which is also expected to show about half a million returned payslips for the last month. Although the ADP’s report has tended to be an imperfect indicator of the final pay figures in the government’s jobs report, it has often provided at least indicative clues as to underlying trends in employment growth.
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7:30 am ET: Stock futures fall after the S&P 500 posted four straight days of gains
Here’s where the markets traded on Wednesday morning:
S&P 500 Futures (ES=F): -10.5 points (-0.23%) to 4,615.00
Dow Futures (YM=F): -77 points (-0.22%) to 35,113.00
Nasdaq futures (NQ=F): -50.25 points (-0.33%) to 15,187.50
raw (CL=F): +$2.79 (+2.68%) to $107.03 a barrel
Gold (GC=F): +$10.60 (+0.55%) to $1,928.60 per ounce
10-year government bonds (^TNX): +1.3 basis points for a return of 2.413%
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7:20 am ET: Mortgage applications fall for third straight week as mortgage rates rise the most in 11 years
US mortgage applications fell for the third straight week last week, with refinancing coming under particular pressure as mortgage rates soared at the highest rate in over a decade.
The Mortgage Bankers Association (MBA) weekly index showed a 6.8% decline in application volume for the week ended March 25. This followed a fall of 8.1% in the previous period and coincided with a rise in the 30-year fixed rate mortgage to 4.8% from 4.5% previously. This was the biggest weekly hike since 2011 to take rates to their highest levels since late 2018.
Funding fell 15% from the previous week and collapsed 60% from the same period last year. On an unadjusted basis, purchases were still 1% higher week-over-week but down 10% compared to the same week last year.
“Mortgage rates rose last week to their highest level in more than three years as investors continue to discount the impact of tighter monetary policy from the Federal Reserve. Not surprisingly, the volume of refinance requests has continued to decline as fewer borrowers have incentive to apply for rates that are significantly higher than a year ago,” said Mike Fratantoni, MBA senior vice president and chief economist, in a press release.
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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 night:
S&P 500 Futures (ES=F): -4.75 points (-0.1%) to 4,620.75
Dow Futures (YM=F): -24 points (-0.07%) to 35,166.00
Nasdaq futures (NQ=F): -15.5 points (-0.1%) to 15,222.25
NEW YORK, NEW YORK – MARCH 28: Traders work on the floor of the New York Stock Exchange (NYSE) on March 28, 2022 in New York City. After a positive week for stocks, the Dow Industrial Average fell over 100 points in morning trade. (Photo by Spencer Platt/Getty Images)
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.
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