Rising bond yields drag on Wall Street futures before opening

Wall Street faces another negative session, as pre-market indicators signal declines. S&P 500 futures slipped 0.3%, while Nasdaq futures fell 0.6% before the opening bell.

This week's decline remains relatively modest compared to the August rally, but caution prevails as global bond yields have surged over the past week.

For some context: a tectonic shift is taking place in the bond market.

The 10-year US Treasury yield climbed to 4.81%, its highest since October 2023, with yields in Europe and Japan also rising sharply.

This is not a single event but a broader trend, which could unsettle wider markets.

Equities generally react negatively to rising yields, and the problem intensifies when the rise stems from inflation or fiscal worries, as is the case now.

Investors then require a higher risk premium, increasing the opportunity cost of holding expensive stocks. Tech shares, in particular, see their valuations and earnings multiples questioned, making them more sensitive to yield increases.

Wall Street's decline this week has been relatively limited so far, despite the expected losses at the open. However, if bond yields keep climbing further, a sharper selloff in stocks could be imminent.

Stay tuned for further developments.