U.S. stock futures rose on Wednesday as bond yields retreated ahead of fresh economic data seen likely to shed light on the outlook for interest rates.
The yield on the benchmark 10-year Treasury note backed off to 5.29 percent from 5.31 percent seen earlier as yields rose to five-year peaks.
The higher interest rate environment is really changing investor sentiment and putting headwinds for the market, said Peter Dunay, investment strategist at Leeb Capital Management in New York. Bond prices and yields move inversely.
S&P 500 futures rose 3.4 points on Wednesday, above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures were up 32 points while Nasdaq 100 futures were up 3.75 points.
Investors worry that rising rates would crimp the takeover activity which has fueled equities so far this year, prolong the housing market downturn and cut into corporate profits.
With import prices data today, PPI on Thursday and CPI on Friday, watch the market really get spooked by higher inflation data. I think 5.5 percent on the 10-year note yield will really spook the market, Dunay added.
Data on U.S. retail sales and import prices for May is due at 8.30 a.m. (1230 GMT), an hour before the opening bell.
Stocks to watch include CBOT Holdings after IntercontinentalExchange Inc. made a sweetened merger proposal for CBOT, continuing the saga for control of the parent of the No. 2 U.S. futures exchange.
The Atlanta-based energy mart is trying to foil a move by Chicago Mercantile Exchange Holdings Inc. to take over the Chicago Board of Trade's parent.
Jones Apparel Group Inc. is nearing a deal to sell its Barneys New York department store chain for $950 million to a private equity firm owned by the Dubai government, according to The New York Post.
A report by The Mortgage Bankers Association underscored the threat of rising interest rates, with data showing that borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.61 percent, their highest since late July.
U.S. stocks tumbled on Tuesday as bond yields shot to their highest in five years, stoking fears higher borrowing costs could cut into corporate profits and discourage takeovers.