US stock futures traded mixed during European hours on Tuesday, with Dow Jones futures falling by 0.16% to around 51,750, S&P 500 futures edging lower by 0.03% to approximately 7,740, and Nasdaq 100 futures gaining 0.12% to near 30,600 [1]. This comes after all major US indices closed lower on Monday: the Dow Jones Industrial Average dropped 0.67%, the S&P 500 declined 0.77%, and the Nasdaq Composite fell 0.92% [1]. The market downturn was attributed to rising expectations of further Federal Reserve rate hikes, which pushed both 10-year and 30-year Treasury yields above 5%, marking fresh multi-year highs [1].
Ongoing uncertainty surrounding US-Iran negotiations has kept oil prices elevated, contributing to persistent inflation concerns and fueling speculation that the Fed will need to tighten monetary policy further [1]. According to the CME FedWatch Tool, money markets are currently pricing in a roughly 70% probability of another Federal Reserve rate increase in October, following the central bank's initial rate hike earlier this month—the first in three years [1].
Strategists at Deutsche Bank noted that the recent rise in US yields and oil prices has pressured equity markets on both sides of the Atlantic, with the S&P 500 experiencing a broad-based decline and the "Magnificent 7" tech leaders falling by 1.72%, highlighting renewed investor caution toward key growth stocks [1].
Market participants are now focused on upcoming US economic indicators for further guidance on monetary policy. Key data releases this week include Wednesday’s Personal Consumption Expenditures (PCE) inflation report and Friday’s Nonfarm Payrolls (NFP) report, both of which are expected to influence the Fed's next moves [1].
CONCLUSION
US equity markets are under pressure due to heightened expectations of further Federal Reserve rate hikes, driven by persistent inflation and elevated oil prices. Investors are closely watching upcoming economic data for signals on the Fed's future policy direction, with market sentiment remaining cautious.