US stock futures slipped on Wednesday alongside falling Treasury prices, while the yen strengthened to a seven-month high, keeping pressure on the dollar. Inflation worries are dominating market sentiment as Brent crude topped $100 a barrel. As of the latest update, Dow futures shed 0.65%, S&P 500 futures declined 0.38%, and Nasdaq futures lost 0.57%. The pan-European Stoxx 600 index dropped 1.2%, dragged down by cyclical sectors sensitive to economic growth.
A four-session winning streak for chip stocks appears to be at risk. An exchange-traded fund tracking major semiconductor makers fell over 1% in premarket trading. Apple Inc shares were little changed ahead of its highly anticipated event, where a foldable iPhone is expected to be unveiled. Asian tech shares followed a similar path, with early gains fading as trading progressed. "With the discount rate facing equity markets rising, risks are building for stocks. The question is whether AI-related earnings can keep growing and continue to drive the market higher," noted Ashley Lester, chief research officer at MSCI.
Oil Returns to $100
Oil climbed for a fourth straight session as Middle East tensions escalated. The US military destroyed five Iranian oil-carrying vessels in response to two previous ballistic missile attempts on American naval destroyers. Tehran subsequently fired missiles toward Jordan and issued warnings to ships in the Persian Gulf. Joachim Klement from Panmure Liberum commented, "Oil at $100 brings inflation pressure back into focus. In this environment, and with the Fed lacking clear forward guidance, Thursday's ECB policy decision and Lagarde's speech become more important. Expect markets to adopt a wait-and-see stance today."
As Brent crude crossed the key $100 threshold for the first time since July, a noticeable reaction swept across asset classes. Meanwhile, traders await Friday's US inflation data, widely seen as pivotal for whether the Fed hikes rates next week. Money markets currently price in about a 60% probability of a Fed move.
Treasury Yields Rise
Concerns over persistent inflation, heavy government borrowing, and a wave of corporate debt issuance have pushed global bond yields to multi-year highs. The Treasury is set to auction $39 billion in 10-year notes on Wednesday, following Tuesday's $58 billion sale of 3-year notes, which saw auction yields hit their highest for that maturity since 2024. The 10-year Treasury yield rose 2 basis points to 4.81%, near levels last seen in 2023. Traders are also watching for details on the Treasury's buyback operation for outstanding 10- and 20-year bonds, part of Treasury Secretary Scott Bessent's efforts to pressure yields lower.
Yen Strengthens for a Third Day
In currency markets, the yen advanced for a third consecutive session, rising 0.3% to 153.52 per dollar. The move was broad-based, with the yen gaining against the euro, pound, and popular carry-trade targets like the Mexican peso and Turkish lira. Bessent directly challenged traders betting against the yen, following historic joint intervention by the US and Japan in late July to support the currency while avoiding Tokyo selling US Treasuries to fund intervention. Speaking at Southern Methodist University's Cox School of Business, he stated, "Now I'm the house. So when we intervene on the yen, I have a pretty good idea of what Japan, the BOJ, and Japanese policymakers will do next. If you want to, you can stand on the other side of me."
Kathleen Brooks, research director at XTB, noted, "While Bessent's comments sound unusual, they hold weight. The US will take necessary measures to protect its Treasury market while supporting the yen." Supporting the yen are expectations of faster BOJ tightening, potential repatriation of overseas funds by Japanese investors, and pressure from Washington for a stronger yen. Traders broadly expect a 25 basis point hike at the BOJ's September 17-18 meeting, but the rally's sustainability hinges on Governor Kazuo Ueda's hawkish tone.
Dollar Slips Slightly
The dollar edged lower, though analysts attribute part of the move to the yen's rapid appreciation and pre-positioning ahead of major central bank meetings. The euro rose 0.18% to $1.1641, near a two-week high, with the ECB widely expected to hike on Thursday. Strategists at OCBC noted that escalating Middle East tensions keep focus on energy prices' impact on Fed policy, especially after last week's strong US jobs report reignited expectations of a September hike. "At this stage, higher oil prices and yields could help limit dollar downside, but clearer directional movement will likely require confirmation from upcoming inflation data," they wrote.
The Canadian dollar largely shrugged off escalating US-Canada trade disputes, inching higher with USD/CAD down 0.1% near C$1.3770, close to a three-week low. On Tuesday, Washington banned imports of several Canadian goods, including alcohol, motorcycles, and dairy products.
Fed May Alter Meeting Cadence
At least a third of Federal Reserve officials have expressed openness to reducing the frequency of rate-setting meetings. Whether the idea gains traction remains uncertain. The policy committee hasn't discussed details, and some open-minded officials want further analysis of trade-offs and whether it aligns with broader communication strategy adjustments. It's unclear if the proposal will be addressed at the September 15-16 policy meeting, which is likely dominated by inflation concerns and the potential first rate hike in three years.
Stock Movers to Watch
Avocado producer Mission Produce jumped 7.5% after reporting fiscal Q3 results that beat FactSet analyst expectations on both adjusted EPS and revenue. Apple shares edged lower as traders awaited its product launch event, expected to showcase several new iPhones, including a foldable model. Convenience store chain Casey's tumbled over 10% despite mixed fiscal Q1 results—earnings and revenue topped estimates, but fuel sales fell 0.3% year-over-year, and growth in prepared food and dispensed beverages slightly missed expectations.
Signet Jewelers surged 17% after fiscal Q2 earnings beat expectations, with adjusted EPS of $2.19 versus the $1.74 consensus, prompting the company to raise its full-year guidance. With US-Iran tensions simmering, Brent crude held above $100 for the first time since July, lifting energy shares. US benchmark WTI futures rose 2.14% to $95 a barrel. The Energy Select Sector SPDR Fund (XLE) gained about 1% in premarket trading, with Exxon Mobil up 1%.
Cloud software firm ServiceTitan plummeted over 17% premarket after issuing Q3 revenue guidance below FactSet analyst estimates, despite beating Q2 revenue expectations at $292.8 million versus $285.9 million and raising its full-year outlook. Customer engagement platform Braze fell nearly 11% in early trading after revenue missed FactSet estimates, though EPS beat forecasts. Fintech company Chime Financial soared over 10% after reporting better-than-expected Q2 results and guiding Q3 revenue to between $680 million and $690 million, above the $640.6 million analyst consensus.
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