U.S. stock index futures reversed early losses on Tuesday, pointing to another day of relief rally on Wall Street even as Treasury yields climbed on bets of more interest rate hikes from the Federal Reserve.
Traders linked premarket gains to portfolio rebalancing at the end of a volatile February, which was dominated by worries about the Fed sticking to its hawkish policies amid strong economic data and signs of elevated inflation.
Wall Street eked out gains on Monday, following heavy selloff last week that had pushed the major benchmarks to their biggest weekly percentage declines of the year.
“Yesterday we had a bargain hunt rally and I suspect that could be the case today,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
“But of course, if the macro news should come in stronger than expected, we could see yields bumped up to the highs.”
BofA Global Research warned the Fed could even hike interest rates to nearly 6%.
The yield on the two-year Treasury note , which tracks investors’ expectations of the path of interest rates, rose to 4.8%, trading just below a near four-month high hit in the previous session.
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