U.S. Futures Slip Amid Concerns Over Treasury Sales and Fed Rate Cuts

1. Futures Decline

U.S. stock futures edged lower on Thursday, extending losses from the previous session as investors grew concerned about rising Treasury yields and the outlook for Federal Reserve interest rate cuts.

By 03:41 ET (07:41 GMT), Dow futures had dropped 334 points or 0.9%, S&P 500 futures fell by 27 points or 0.5%, and Nasdaq 100 futures were down by 110 points or 0.6%.

The previous day saw Wall Street averages decline, driven by an increase in Treasury yields due to weak demand for new U.S. government debt auctions. The 10-year Treasury yield hit a four-week high of 4.6%, adding to gains from Tuesday.

Persistent inflation and recent comments from Fed officials have led some market observers to adjust their expectations for rate cuts this year. Traders now anticipate just one rate cut in November or December, rather than two in 2024, according to the CME FedWatch Tool.

This sentiment could be influenced further by the upcoming release of the monthly personal consumption expenditures price index, the Fed’s preferred inflation measure. Policymakers have indicated the need for more evidence of price gains cooling to their 2% target before reducing borrowing costs from current highs.

2. Salesforce Shares Drop Post-Earnings Miss

Salesforce shares fell over 16% in after-hours trading after the company’s second-quarter guidance missed analysts’ estimates.

The disappointing outlook was due to weak client spending on business products and services, dampening optimism about Salesforce’s plan to leverage generative AI for growth. CEO Marc Benioff maintained a positive outlook on AI, calling it a “massive opportunity” for customer engagement.

Salesforce projected adjusted earnings per share of $1.31 to $1.33 on revenue of $9.20 billion to $9.25 billion for the fiscal second quarter, below Wall Street expectations of $1.47 per share and $9.34 billion in revenue.

The company also revised its annual subscription and support revenue growth forecast to slightly below 10%, down from a previously anticipated 10%.

Conversely, HP Inc. reported second-quarter sales that beat estimates, signaling improving strength in the personal computing market. HP shares rose in after-hours trading.

3. Peltz Sells Disney Stake

Activist investor Nelson Peltz has sold his entire stake in Walt Disney Company, according to a CNBC report.

Peltz sold his shares at about $120 each, generating around $1 billion. Disney shares closed at $100.88 on Wednesday, having risen over 11% this year.

This move follows Trian Partners’ failed proxy battle during Disney’s shareholder meeting in April, where stakeholders re-elected the full board, rejecting Peltz’s bid for board seats.

Peltz had criticized Disney’s governance, particularly its streaming strategy and CEO succession plans.

4. UBS Reshuffles Leadership

UBS has reorganized its executive board, dividing responsibility for its wealth management division between Iqbal Khan and Rob Karofsky, who are seen as potential successors to CEO Sergio Ermotti, according to the Financial Times.

Khan will lead UBS’s Asia-Pacific business, while Karofsky will manage the Americas division. This restructuring is part of UBS’s integration of Credit Suisse following their government-brokered merger last year.

Credit Suisse CEO Ulrich Körner will step down, and UBS Americas head Naureen Hassan will retire. Körner will be the last CEO in Credit Suisse’s 168-year history.

5. Crude Prices Drop Despite Inventory Draw

Crude oil prices declined on Thursday due to concerns over high borrowing costs, despite a larger-than-expected draw in U.S. inventories.

By 03:42 ET, U.S. crude futures were down 0.5% at $78.81 per barrel, and Brent crude fell 0.6% to $82.97 a barrel.

The American Petroleum Institute reported a 6.5 million barrel drop in U.S. oil inventories last week, far exceeding expectations of a 1.9 million barrel draw. This significant draw suggests increasing U.S. fuel demand as the summer travel season begins, marked by Memorial Day weekend.