U.S. stock futures pull back, with tech under pressure as bond yields climb

What’s driving markets?

Friday will be devoid of major data, leaving investors to mull over the past week’s economic updates and hawkish comments from at least one Fed official on Thursday.

Treasury yields were notably climbing on Friday as investors returned to the view that Fed hikes were not quite over, with that of the 10-year yield
TMUBMUSD10Y,
2.927%
up 5 basis points to 2.913% and the 2-year
TMUBMUSD02Y,
3.238%
up 2 basis points to 3.229%.

St. Louis Fed President James Bullard told The Wall Street Journal that he would “lean toward” a 75 basis point hike at the central bank’s next Sept. 20-21 policy meeting. On the same day, investors heard more cautious comments from Kansas City Fed President Esther George, who said how fast hikes will happen remains up for debate.

Richmond Fed President Tom Barkin will speak at 9 a.m. Eastern Time. Investors are also focused on next week’s Jackson Hole Symposium, with Federal Reserve Chairman Jerome Powell and other central bank officials scheduled to speak.

Opinion: The Fed is not getting cold feet about wrestling inflation to the ground, so stop misreading its minutes

Interest-rate sensitive tech stocks appeared ready to bear the brunt, with Nasdaq futures falling, The Nasdaq Composite index is poised for a 0.6% weekly drop, while the S&P 500 is clinging to positive territory, after both indexes ended last week with a fourth-straight win, their longest weekly streak since November 2021.

“It is patently clear that the Fed has inflation reduction as its main aim, even though it acknowledges the knock-on risk of derailing the economy,” said Richard Hunter, head of markets at interactive investor.

“The market is still pricing in a 0.5% interest rate rise in September, although there are increasing concerns that another 0.75% hike could be on the cards, with rates currently projected to peak at 3.5%. Separate comments from several Fed officials suggested that there remains some way to go before victory can be declared on taming inflation,” said Hunter.

Data this week revealed flat retail sales and disappointing results from some major retailers, such as Target
TGT,
-1.31%
and Kohl’s
KSS,
-7.72%,
but Thursday brought data showing weekly jobless claims falling 2,000 to 250,000, with no signs of mass layoffs.

Economic bellwether and tractor maker Deere & Co
DE,
+0.90%.
will report ahead of the market open.

Across other markets, investors were also selling crude, with West Texas Intermediate crude
CL.1,
-1.33%
for September down 1.1% to $89.43 a barrel, and Brent
BRN00,
-1.35%
off 1.2% to $95.41 a barrel.