Dow Jones futures fall as US Treasury yields rebound ahead of FOMC Minutes

• Benchmark 10-year yield rising above 5.30% weighs on US index futures ahead of Fed minutes.
• Climbing crude oil prices keep potential interest rate hike expectations alive despite recent weak labor data.
• Subdued futures follow a strong regular US session where chipmakers led Wall Street to new record highs.

Dow Jones futures decline by 0.14% to trade near 51,750 during European hours on Wednesday. S&P 500 futures remain steady around 7,870, while Nasdaq 100 futures fall by 0.18% to trade near 31,430.

US stock futures remain subdued as a rebound in US Treasury yields weighed on investor sentiment ahead of the release of the Federal Open Market Committee (FOMC) meeting minutes. Treasury bonds continue to experience pressure, pushing the 10-year yield above 5.30% and keeping the 30-year yield near 5.69%. This elevated yield environment is driven primarily by persistent inflation concerns, expanding fiscal deficits, and a substantial rise in AI-related debt issuance.

Crude oil prices have advanced amid escalating geopolitical conflict in the Middle East, adding to inflationary pressures and keeping potential rate-hike speculation active. Nevertheless, recent softer US labor market data has softened expectations for aggressive monetary tightening by the Federal Reserve. According to the CME FedWatch tool, traders are pricing in only about a 22% probability of an interest rate increase at the Fed's upcoming October meeting.

This subdued futures activity follows a bullish session on Wall Street, where major equity averages surged to fresh record highs on Tuesday, driven by a powerful rally in technology shares. During regular US trading, the S&P 500 added 0.58%, and the Nasdaq Composite rose 0.45%, both finishing at all-time highs, while the Dow Jones Industrial Average gained 0.49%. Semiconductor stocks led the market higher, with AMD, Marvell Technology, and Broadcom posting notable gains.

Fed’s Schmid flags AI-driven price pressures, keeps hawkish bias intact

Fed’s Schmid speech scores 8/10 on the FXS Speechtracker, modestly above the 7.5/10 historical average, underscoring a slightly more hawkish tone relative to the established baseline. The emphasis that the labor force “remains in a good place” alongside “inflation is frustrating, must be fixed” and “still have a way to go in beating inflation” reinforces a narrative of solid growth but persistent price risks. By highlighting AI as “one of the largest drivers of inflation” and stressing that the Fed’s credibility is at stake and that “the Fed still has work to do on the short rate despite higher long-term yields,” the speech leans clearly toward further policy tightening or at least a prolonged restrictive stance, a Dollar-supportive configuration.

The FXS Fed Sentiment Index rose by 0.34 points to 137.91, firmly in hawkish territory well above the neutral 100 threshold, consistent with the elevated 8/10 FXS Speechtracker score. This incremental move higher signals that, despite recent long-end yield dynamics, the perceived policy bias remains skewed toward keeping rates elevated, which should underpin the Dollar against lower-yielding peers.