US stock index futures fell on Thursday, indicating a lower open on Wall Street, after yields on all Treasuries debt securities reach or top 5 per cent, raising concern that stocks face more competition from fixed-income assets.
The spring rally in stocks has sputtered in the past two days as worries about inflation and the possibility of higher interest rates haves crept back into the forefront of investors' concerns. Higher rates discourage consumer spending and crimp profit margins.
"The market needs a little bit of a correction, and with rates above 5 per cent that gives them an excuse to pull back...a little bit of correction that's been overdue," said Tom Schrader, managing director, US equity trading, Stifel Nicolaus Capital Markets.
S&P 500 futures were down 0.2 points, below fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.
Dow Jones industrial average futures fell 9 points, and Nasdaq 100 futures were down 3 points.
The move in bonds sent the entire US Treasury yield curve to or above 5 per cent for the first time since July.
Further weighing on stock futures, Wal-Mart Stores Inc said its sales at US stores open at least a year rose in May toward the low end of its forecast. The world's largest retailer also gave a cautious view for June sales, adding that shoppers are more concerned about gas prices from January through April.
Earlier, Costco Wholesale Corp reported a 7 per cent increase in May sales, topping the 5.4 per cent gain that analysts had forecast.