Wall Street futures decline due to rising Treasury yields

(Reuters) – U.S. stock index futures fell in light trading volume on Monday as rising Treasury yields threatened to put a damper on a historically strong year-end period for stocks.

At 05:36 a.m. EDT, Dow E-minis were down 78 points, or 0.18%, S&P 500 E-minis were down 12.75 points, or 0.21%, and Nasdaq 100 E-minis were down 43.75 points, or 0.20%.

Stocks tend to do well in the last five trading days of December through the first two days of January, a phenomenon called the Santa Claus spike. The S&P 500 has risen 1.3% on average over the period since 1969, according to Stock Traders Almanac.

The benchmark index posted marginal gains last week, with analysts pointing to a strong rally earlier in the year that led to higher valuations. The index has been trading in a bull market for more than two years and is expected to end its second year in a row with gains of more than 20%.

Much of the rise this year has been driven by optimism about interest rate cuts, the integration of artificial intelligence that boosts corporate profitability, and expectations that President-elect Donald Trump’s policies can stimulate economic growth.

However, some analysts expect Trump’s policies to be inflationary, with US Treasury yields holding across the curve at multi-month highs. (we/)

Since early December, the yield on the benchmark 10-year bond has risen to its highest level since May 2024. Today, it was slightly lower.

Investors tempered their expectations about the total number of interest rate cuts by the Federal Reserve in 2025 after the institution struck a dovish tone at its meeting earlier in the month.

They now expect the central bank to make its first rate cut in May next year, according to CME Group’s FedWatch tool.

Later in the week, investors will examine the Institute for Supply Management’s manufacturing activity survey for December and the weekly report on unemployment claims, ahead of the key employment report scheduled for the following week.

Growth stocks weakened in premarket trading. Tesla shares fell 1.6%, Meta shares fell 0.5%, while chip company Broadcom shares lost 0.6%, and Nvidia shares fell 0.8%.

South Korea has ordered an emergency safety inspection of its entire airline operating system after the country’s worst air disaster over the weekend involving a Boeing plane. Boeing shares fell 4.5%.

Trading is expected to be affected by weak volumes in the run-up to the New Year holiday on Wednesday and is likely to remain weak until January 6.

(Reporting by Johan M. Cherian and Pranav Kashyap in Bengaluru; Editing by Devika Simnath)