U.S. stocks index futures treaded water on Monday, ahead of a bevy of earnings from the world’s biggest companies and as wary investors watched U.S. bond yields approach peaks that have sparked stock selloffs in the past.
The yield on 10-year U.S. Treasuries, the benchmark for global borrowing costs, hit 2.9980 percent, its highest since January 2014. The U.S. five-year inflation swap, a key market gauge of long-term U.S. inflation, hit its highest level in 3-1/2 years.
The last time 10-year Treasury yields neared 3 percent, in 2013, it rocked risk appetite and sent stocks sliding and was shortly before oil prices went on a mighty 75 percent tumble. More recently, the stock market sold off in February as inflation expectations sent treasury yields surging.
Bond yields have also been pushed higher as a surge in Brent crude oil prices LCOc1 to around $74 per barrel boosted inflation expectations, particularly in the United States.
“Inflation in the U.S. is more sensitive to oil prices than many other regions so it makes sense for inflation expectations to rise there,” said Mizuho strategist Antoine Bouvet.
At 7:35 a.m. ET, Dow e-minis 1YMc1 were down 7 points, or 0.03 percent. S&P 500 e-minis ESc1 were up 0.5 points, or 0.02 percent. Nasdaq 100 e-minis NQc1 were up 7.75 points, or 0.12 percent.
The prospects of rising inflation come as U.S. companies are reporting results for what is turning out to be a much stronger-than-expected first quarter.
This week, 181 S&P 500 companies are scheduled to report including some of the technology heavy-hitters like Facebook, Microsoft, Amazon and Intel. Alphabet reports after markets close on Monday.
Shares of Hasbro fell 7.3 percent in premarket trading after the toymaker reported a bigger-than-expected drop in quarterly revenue, blaming the liquidation of Toys ‘R’ Us.
Aside from earnings and interest rates, U.S. Treasury Secretary Steven Mnuchin said on Saturday he may travel to China, a move that could ease tensions between the world’s two largest economies.
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