US stock futures trade flat as investors digest recent rise in bond yields

The US stock futures are little changed on Wednesday, with investors assessing the impact of rising US bond yields on markets and economy and awaiting additional stimulus measures amid political turmoil in Washington. 

At press time, the futures tied to the S&P 500, Wall Street's benchmark index, are sidelined near 31,000. The index saw two-way business on Tuesday. 

The bull market has paused since Friday alongside a rise in inflation expectations and Treasury yields. The uptick in yields has weakened the appeal of overbought equities and zero-yielding assets such as gold. The 10-year yield rose to a 10-month high of 1.18% on Tuesday and is currently trading near 1.11%. 

Expectations for additional fiscal stimulus is one of the reasons behind the recent rise in yields. President-elect Joe Biden is likely to reveal details of his economic plan on Thursday.

According to a CNBC report citing UBS Global Wealth Management, even a $500 billion fiscal package consisting of additional stimulus checks, extended unemployment benefits, and funding for healthcare and vaccine disbursement could boost economic growth in 2021. 

Stock markets may face renewed selling pressure if the stimulus falls short of expectations. In that case, the dollar, which has been treated as funding currency since the March crash, could find bids. 

A potential escalation of political tensions in Washington also poses a risk to stock markets. Vice President Mike Pence said Tuesday in a letter to House Speaker Nancy Pelosi that he will not remove President Donald Trump from office. Pence's comments came as the Democratic-held House planned to vote on a resolution calling on him and the Cabinet to invoke the 25th Amendment.