S&P 500 Futures stay depressed as yield renew multi-month high amid inflation, rate hike woes

Risk profile deteriorates after an upbeat start of March as US Treasury bond yields rally to multi-month high and highlight the fears of higher inflation and rates during early Thursday. Adding strength to the risk-off mood could be the likely US-China tension at the Group of 20 (G20) meetings.

That said, the US 10-year Treasury bond yields rose to the highest levels since early November 2022 by piercing the 4.0% mark, whereas the two-year counterpart rallied to the highest levels since June 2007 by flashing the 4.91% mark at the latest.

The jump in the US Treasury bond yields portrays the market’s fears, which probed bulls on Wall Street and weighed on S&P 500 Futures of late. As a result, the S&P 500 Futures dropped half a per cent by the press time despite the mixed closing of the Wall Street benchmarks.

While checking the roots, the US ISM Manufacturing PMI details for February gained significant attention as the headline gauge rose to 47.7 during the said month from 47.4 prior, versus the 48.0 expected. However, the details of the stated vital activity gauge suggest that the Prices Paid and New Orders marked the highest figures in five and four months respectively.

Ahead of the data, Minneapolis Federal Reserve (Fed) President Neel Kashkari said, "Wage growth is now too high to be consistent with 2% inflation." The policymaker also added and noted that it is concerning that the Federal Reserve's rate hikes so far have not brought down service inflation. The Fed and policymakers from the Bank of England (BoE) and the European Central Bank (ECB) also highlighted the need for further rate lifts to battle the inflation woes.

Elsewhere, the market’s anxiety ahead of the Group of 20 (G20) meeting also weighs the sentiment. The latest New York Times (NYT) headlines suggest a possible rift between the US and China at the key event. “China is urging the start of peace talks, and some Group of 20 nations could support that idea when they gather in India, but U.S. officials argue Russia would not negotiate in good faith,” said the news.

Amid these plays, the US Dollar Index (DXY) pared the previous day’s losses while bouncing off a one-week low, whereas stocks in the Asia-Pacific zone traded mixed. Further, the Gold price joins the Oil to recall sellers after a few days of buyer’s dominance.

Moving on, updates from the G20 could join central bankers’ comments and the second-tier data from the US to entertain market players ahead of Friday’s US ISM Services PMI, which becomes the key amid fears of strong services inflation.