US stock futures pointed to a cautious start on Thursday, 20 August, as futures tied to all three major indices traded largely steady amid elevated crude oil prices and a rebound in bond yields following their sharp pullback in the previous session.
Dow Jones Industrial Average futures were down a modest 0.1%, while Nasdaq-100 futures also slipped 0.1%. S&P 500 futures remained largely unchanged.
The weakness comes after all three major indices ended Wednesday’s session in the green, snapping a three-day losing streak after the US Treasury doubled its debt buyback programme to help calm the bond market.
However, bond yields edged higher again on Thursday, with the 30-year Treasury yield rising 3 basis points to 5.2256%.
Global demand for US Treasuries has weakened in recent months, with Japan and China reportedly reducing their holdings amid growing concerns over large US budget deficits and persistently above-target inflation. The weakening demand has added pressure to the bond market, contributing to the recent surge in longer-dated Treasury yields.
In response to the mounting stress in the bond market, the US Treasury Department on Wednesday raised the maximum size of its Treasury security buyback operations for the period through November 4, targeting the sensitive longer-duration segment of the market.
The move triggered a sharp pullback in yields during the previous session and provided temporary relief to Wall Street. However, underlying concerns over the US fiscal outlook remain, with the national debt surpassing a record $40 trillion on Wednesday amid rising defence spending and increased US involvement in the Middle East.
Following the Treasury’s move, the US Dollar Index slipped to its lowest level since late May and has since hovered around 98.8 against a basket of major currencies.
Among individual stocks, Walmart’s stock slid more than 6% in pre-market trade as the retail giant gave a cautious outlook for the year.
Fresh Middle East tensions add to market concerns
Adding to the cautious mood, tensions in the Middle East are expected to escalate after US President Donald Trump on Wednesday announced what he described as the “most crushing economic operation ever taken against any country” against Iran.
In a post on Truth Social, Trump warned that any country doing business with Iran or providing financial assistance to Tehran in any form would face “tremendous” consequences for its actions.
The announcement came after Trump said that the US was not engaged in any talks with Iran and had no plans to begin fresh negotiations. He also said he was not interested in extending the 60-day interim peace deal, which expired on Monday.
Trump further threatened to bomb Oman if the country interfered with the US blockade of Iranian ships in the Strait of Hormuz. The ongoing standoff between the US and Iran over control of the strategic waterway has kept crude oil prices elevated after sharp whipsaw movements last month.
Oil prices remain elevated
Brent crude advanced 0.4% to around $92 a barrel, remaining higher for the fifth session in a row, after Trump announced an unprecedented economic warfare operation against Iran, accusing the country of failing to take the opportunity to reach a deal.
The US benchmark West Texas Intermediate crude jumped 2.8% to $86.72 a barrel.
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