US stock futures drifted slightly lower Tuesday evening after a regular session rally, as investors cheered upbeat developments on discussions between Russia and Ukraine.
Contracts on the S&P 500 traded flat to slightly lower. The blue-chip index rose for a fourth consecutive day and closed at its highest level since January earlier Tuesday, unwinding some losses for the year-to-date. Technology stocks led the way higher and helped pull the Nasdaq Composite up by nearly 2%. The CBOE Volatility Index, or VIX, fell below 19 to reach its lowest level in more than two months.
Stocks rose while US crude oil prices fell for a back-to-back session amid signs of progress in Russia-Ukraine talks. Russia said it was easing military action in Ukraine’s capital Kyiv and northern city Chernihiv and was prepared to set a meeting between Russian President Vladimir Putin and Ukraine’s President Volodymyr Zelensky following a draft peace agreement.
Meanwhile, investors nervously eyed a flattening US Treasury yield curve, with longer-duration bond yields falling much more sharply than those on the short end as traders bet on higher rates from the Federal Reserve in the near-term and mulled a murky macroeconomic outlook over the longer term. The spread, or difference, between the 2-year and 10-year Treasury note yields — a closely watched part of the yield curve which has typically inverted ahead of recessions — narrowed to less than 1 basis point to reach its lowest level since 2019.
“It is still a pretty accurate indicator [of a recession] if we go back and look at history, but I have to give you a few caveats,” Kristina Hooper, Invesco chief global market strategist, told Yahoo Finance Live on Tuesday. “First of all, it needs to invert for some time, typically three months, to be a very accurate indicator. Second, it’s a longer-term indicator. So usually after the yield curve inverts, it takes about 18 months on average for a recession to occur. And it is a terrible, terrible sell signal, because typically stocks have room to run and do run significantly higher after a yield curve inverts.”
The latest batch of US economic data offered a mixed picture on the state of the economy amid still-elevated inflation, ongoing geopolitical uncertainty and tightening monetary policy out of the Federal Reserve. Job openings held little changed at about 11.3 million in March, far outpacing new hires at 6.7 million to reflect persistently rampant labor supply shortages. And while the Conference Board’s latest monthly index showed a slight uptick in consumer confidence in March, the index remained below last year’s average. Plus, consumers’ one-year inflation expectations soared to an all-time high of 7.9%.
“We expect a clear downshift in inflation expectations in the second half of the year, but they could easily rise further in the near-term,” Ian Shepherdson, chief US economist for Pantheon Macroeconomics, wrote in a note Tuesday.
“The survey sends mixed signals on the state of the economy but, always, remember that sentiment is not the same as spending, which is what matters,” he added.
6:12 pm ET Tuesday: Stock futures open slightly lower
Here’s where the major stock index futures opened Tuesday evening:
S&P 500 futures (ES=F): -4.75 points (-0.1%) to 4,620.75
Dow futures (YM=F): -24 points (-0.07%) to 35,166.00
Nasdaq futures (NQ=F): -15.5 points (-0.1%) to 15,222.25
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.
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