US pre-open: Stocks at two-week low as risk appetite wanes
US stocks were set to fall for the fourth straight day with 10-year bond yields continue to flirt with the 5% level, while ongoing conflict in Israel continues to prompt caution on financial markets.
West Texas Intermediate futures were up 1.5% at $90.70 a barrel on supply concerns in the Middle East, while gold prices gained a further 0.7% to $1,994.3 an ounce on investors sought safe-haven assets.
Futures on the Dow Jones Industrial Average were down 0,.2% in pre-market trading, while the S&P 500 fell 0.3% and the Nasdaq slipped 0.4%. This will be the fourth straight daily decline for the S&P 500 in particular, with the index having not closed below current levels since 5 October.
The yield on a 10-year US Treasury jumped to a high of 4.997% yesterday after comments from Federal Reserve chair Jerome Powell on his assessment of the economic recovery and the current state of monetary policy. Yields were pulling back to the 4.954% mark by 0606 ET.
While Powell didn't go as far as saying that another rate hike was on the cards, he said that monetary policy wasn't "too tight right now" and that policymakers were "united in our commitment to bringing inflation down sustainably to 2%". In prepared remarks, Powell said the recent easing of inflation was a positive sign, but economic indicators in September were "somewhat less encouraging".
According to Stephen Innes, managing partner at SPI Asset Management, rising yields "continue to dominate macro discussions in virtually every earnings report and corner on Wall Street".
Israel conflict hits sentiment
Meanwhile, the ongoing crisis in the Middle East is continuing to "hang around investors' necks like an anvil", according to Innes.
The US government has thrown its weight behind the Israeli government's continued siege of Gaza, which has only increased tensions with neighbouring nations and the international community who have called for an immediate ceasefire.
The Pentagon has now reported that US military bases in Iraq and Syria have been hit by drone attacks, raising concerns that the war between Israel and Hamas may escalate into widespread conflict across the Middle East.
Innes said: "Similar to last weekend, we could see the return of hedging the gnarly weekend headline risk dynamics drive sentiment into the close, where investors will be reluctant to take on stock market risk while opting for the safety of last resort hedges like the vix, oil and gold."
Stock movements
American Express is to report its quarterly earnings before the opening bell, while the market get to react to disappointing results from solar company SolarEdge, which dropped 20% after-hours following a cut to revenue guidance.
Also reporting after the bell last night: Intuitive Surgical will also likely be out of favour after missing analysts' forecasts, while Knight-Swift Transportation smashed estimates.