Dow Futures Fall, Bond Yields Climb — and What Else Is Happening in the Stock Market Today

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The yield on the 10-year Treasury rose above 3% for the first time since mid-May.

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Stock futures traded lower Tuesday as bonds sold off with investors fearing the Federal Reserve and other global central banks will have to be more aggressive in their efforts to tame inflation.

The Reserve Bank of Australia surprised markets Tuesday with a larger-than-expected interest rate hike of half a point.

Contracts linked to the Dow Jones Industrial Average fell 128 points, or 0.4%, to 32,784, S&P 500 futures were down 0.4% and Nasdaq futures declined 0.6%. U.S. stocks finished modestly higher on Monday.

The yield on the 10-year Treasury was at 3.027% early Tuesday, rising above 3% for the first time since mid-May. The yield was at 2.94% on Friday.

A stronger-than-expected U.S. jobs report for May along with rising wages are just the latest data points that have Wall Street believing the Fed will have continue to raise interest rates aggressively. U.S. inflation data, to be released Friday, will be closely scrutinized. Economists expect an increase in the consumer price index for May of 8.2% from a year earlier. Core inflation, which strips out food and energy, is forecast at 5.9% vs. 6.2% a month earlier.

Jeffrey Halley, senior market analyst at Oanda, said he wasn’t entirely convinced that the rise in yields above 3% was driven by inflation and fears of Fed tightening. He noted how $96 billion of U.S. bond debt will be sold later this week.

“Time will tell although if most of the U.S. curve is still above 3% come Friday, the post-U.S. inflation price action could be frisky indeed,” Halley added.

Write to Joe Woelfel at joseph.woelfel@barrons.com