Wall Street heads to a weak open as interest rates rise again

March 1 (Reuters) – Wall Street’s major indices were expected to come under pressure on Wednesday, with equity futures reversing early gains as higher Treasury yields offset a boost from a jump in Chinese manufacturing activity.

Major US benchmarks ended February with declines as investors braced for the possibility of the Fed raising rates more than initially thought due to signs of resilience in the economy.

Yields on two-year government bonds, which closely track short-term interest rate expectations, rose to 4.83% on Wednesday, after hitting a four-month high of 4.86% earlier in the session.

“The market is still in a wait and see mode. It doesn’t know if yields are going to rise and make another huge increase or if this is just a small counter-trend rally and that’s why you see a lot of uncertainty,” said Adam Sarhan, CEO of 50 Park Investments.

Traders are praising the expectation that the Fed will raise rates to a range of 5.25%-5.50% in the coming months, instead of the current range of 4.50%-4.75%. That is higher than where Fed policymakers indicated in December that they should raise key rates.

Monthly reports on US payrolls and consumer prices in the coming days will further help investors gauge the path of interest rates ahead of the March 21-22 meeting of the Fed.

Money market traders see an approximately 80% chance of a 25 basis point rate hike later this month, but the likelihood of a larger 50 basis point rate hike has increased recently.

Futures were previously higher after data showed manufacturing activity in China grew at its fastest pace in more than a decade.

At 8:55 a.m. ET, Dow e-minis were down 62 points, or 0.19%, S&P 500 e-minis were down 7.75 points, or 0.19%, and Nasdaq 100 e-minis were down 15.5 points, or 0.13%.

Factory activity data from the Institute for Supply Management for February is expected at 10 a.m. ET. Minneapolis Fed President Neel Kashkari, a voter on the 2023 Tariff Committee, will speak for the opening bell.

Novavax Inc (NVAX.O) fell 26.3% in premarket trading after the COVID-19 vaccine maker cast doubt on its ability to stay in business and announced plans to cut spending in preparation for a fall vaccine campaign.

AMC Entertainment Holdings Inc (AMC.N) fell 5.2% after the theater chain posted a more than 15% drop in revenue in its fourth quarter.

Kohl’s Corp (KSS.N) fell 7.8% as the retailer forecast full-year earnings below analyst estimates due to weak demand for apparel and accessories.

Tesla Inc (TSLA.O) rose 0.3% leading up to the investor day event. The electric car maker is preparing a production revamp of its top-selling Model Y, Reuters reported, citing people familiar with the plan.

Reporting by Sruthi Shankar and Shristi Achar A in Bengaluru; Edited by Arun Koyyur and Sriraj Kalluvila

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