US stock futures indicated a lower start for Wall Street on Tuesday after the S&P 500 nabbed its biggest two-day rebound since 2016.
S&P 500 futures were down 0.3 per cent to 2,646.25 while Dow futures were down 0.4 per cent to 24,486 and Nasdaq futures were off 0.4 per cent at 6,510.25.
The pullback follows a strong two day bounce after all three major benchmark indices briefly entered correction territory last week. Concerns about inflation and higher rates alongside an unwinding of trades betting on low market volatility have sent ripples through markets recently.
Elsewhere, the yield on the US 10-year Treasury slid 2 basis points to 2.838 per cent after hitting the highest level in four years on Monday.
Jitters about a pick-up in inflation have sent shockwaves through the bond market with the Bank of America’s latest fund manager survey showing fund managers have cut their bond allocations to the lowest since 1998. Lower demand for bonds — and therefore lower bond prices — pushes up yields.
Investors now turn their attention to US consumer price data due on Wednesday as they try to determine whether the Federal Reserve will accelerate its pace of interest rate rises this year.
While the central bank has pencilled in three moves this year a number of economists on Wall Street expect the Fed could lift rates as many as four times, with Credit Suisse the latest to join the chorus. After the Fed boosted their growth outlook for 2018 in December, the Swiss bank expects another upward revision in the wake of the tax overhaul and argues “prudent risk management suggests the Fed ought to accelerate their tightening in response to a large positive demand shock”.
Meanwhile, the dollar index — a gauge of the buck against its basket of peers — was down 0.5 per cent to 89.79.