US stock futures pointed to a sharply lower open on Thursday, with the Nasdaq leading declines as a renewed bond sell-off and elevated oil prices overshadowed optimism around the Trump-Xi summit. Nasdaq 100 futures dropped more than 300 points, or roughly 1%, while S&P 500 futures lost 0.6% and Dow futures slipped 0.3%.
The 10-year Treasury yield remained above 5%, and the 30-year yield climbed to its highest level since 2004, intensifying pressure on growth-oriented technology stocks. Brent crude held above $102 as US-Iran tensions showed no sign of quick resolution, adding to inflation concerns and squeezing transport margins.
Bond market turmoil weighs on equities
Wednesday's sell-off pushed the 10-year yield to 5.11%, its highest close since 2007, after stronger-than-expected US business activity, hawkish commentary from Federal Reserve officials, and a weak five-year Treasury auction. On Thursday, the 30-year yield reached 5.444%, a level not seen in two decades.
Standard Chartered US rates strategist John Davies told Barron's that the 10-year yield could rise to 5.5% over the next year, citing persistent inflation, fiscal concerns, and heavy investment keeping term premiums elevated. Higher yields make future earnings less attractive, hitting high-valuation tech names hardest.
Trump-Xi summit: avoiding a new shock
President Donald Trump and Chinese President Xi Jinping are scheduled to meet in Washington on Thursday, following the extension of the tariff truce by two months to January 10, 2027. Trade, rare earths, AI, Taiwan, and Iran are expected to be on the agenda.
The immediate market objective is to prevent another escalation in tariffs or technology controls, rather than to secure a sweeping agreement. The two sides have also discussed an AI incident-notification mechanism as competition in advanced technology intensifies.
Oil above $100 hits airlines and cruises
Brent crude remained above $102 after US-Iran exchanges at the United Nations dampened hopes for a quick diplomatic breakthrough. Expensive fuel squeezes transport margins and reinforces inflation concerns.
JetBlue and United fell more than 1% in premarket trading, while Norwegian Cruise and Royal Caribbean also declined. Cboe strategist Mandy Xu told MarketWatch that the relationship between oil and Treasury yields is near its strongest in decades, making Middle East headlines unusually significant for bond markets.
AI winners feel the yield squeeze
Meta fell about 2% before the bell, Nvidia lost around 1%, and Intel and Marvell dropped roughly 3%. The reversal comes after AI stocks powered the Nasdaq to records earlier this week.
Meta remains central to the theme after unveiling Charm, a small device built around its Muse AI assistant, but Thursday's action shows enthusiasm being tested by yields above 5%. MGM Resorts was another standout mover, dropping about 8% after People Incorporated withdrew its $48.30-a-share takeover proposal.
Jobless claims and Fed speakers in focus
Initial jobless claims are due at 8:30 am ET, with economists expecting about 201,000 filings after 196,000 the previous week. New home sales follow at 10 am.
New York Fed President John Williams said Thursday that another rate increase this year remains a reasonable possibility. Cleveland Fed President Beth Hammack and Philadelphia Fed President Anna Paulson are also scheduled to speak. Markets now assign roughly a 71% probability to another quarter-point increase in October. A strong labour reading could keep pressure on equity valuations.
This article is for informational purposes only and does not constitute financial advice.
