The E-mini Dow Jones futures contract was down 93 points to 49,675 at a quarter past six on Tuesday morning. This 0.19 percent decline may seem insignificant, but it has significant implications. Overnight, the number had increased. As the hours drew closer to the New York open, it began at 49,740, rose to 49,838, and then drifted lower. As is always the case before the city’s traders have finished their coffee, the volume was low, at about fifteen thousand contracts. Those pre-market hours have a certain stillness, with the futures silently debating what kind of day it will be while the screens glow in offices that won’t fill up for another two hours.
When you look at this, the disparity between the Dow and its surroundings is what strikes you. Futures on the Nasdaq 100 fell 0.7%. Contracts for the S&P 500 had dropped by 0.4. It’s no coincidence that the Dow’s loss was the least of the three. On Monday, the same story was told in reverse: the blue-chip Dow ended the day up 159 points, or almost a third of a percent, at 49,686, while the Nasdaq Composite closed down half a percent and the S&P hardly moved. The old, dull, industrial-heavy index barely held steady while memory-chip stocks were being battered—Seagate fell nearly 7% after its CEO stated that new factories would take too long. It’s difficult not to interpret that.
The stocks aren’t actually what’s driving it all. It’s the 10-year Treasury yield, which reached its highest intraday level since February of last year early on Tuesday at about 4.62 percent. That figure is significant because it is the basis for auto loans, mortgages, and the calculations used by investors to determine the value of a rapidly expanding business. Expensive growth stories are repriced most quickly when yields rise, which is why the Dow, which is made up of slower and more stable companies, holds while the AI-heavy Nasdaq declines. Investors appear to think that inflation is becoming a serious issue once more rather than a diminishing one.
This also involves oil. Before the news that President Trump had halted a military strike on Iran that was supposedly scheduled for Tuesday at the request of Gulf allies, West Texas Intermediate had been close to $108 per barrel. Watching markets respond to a Truth Social post about war and negotiations has an odd rhythm: the futures tick, the oil price softens, and somewhere a trader recalculates the likelihood that the Federal Reserve will raise rates rather than lower them. The high oil prices, according to Ben Fulton of WEBs Investments, are a “watershed” problem that is difficult to reverse. Whether any of this ends neatly is still up in the air.
And Wednesday comes next. Expectations are stretched to the limit by Nvidia’s post-close report. When you put it bluntly, the entire AI trade has turned into what keeps markets afloat in the face of inflation fears and tensions in the Middle East. After announcing an AI cloud venture with Blackstone, Alphabet is at an all-time high with a market capitalization of nearly $5 trillion. Last quarter, Berkshire tripled its stake, while Ackman’s fund sold nearly all of his. Smart money is at odds with itself. People don’t realize how often that occurs.
For the time being, the Dow futures are simply losing less than everyone else and refusing to completely join the panic, as they have done all week. They have increased by more than 7% over the past six months and nearly 16% over the past year. This index seems to be a sort of ballast, slow, unglamorous, and strangely comforting on mornings when the exciting stocks are collapsing. It remains to be seen if Nvidia’s figures and Iran’s situation will support that. The screen was still showing negative by Tuesday afternoon. Negative, but smaller than the others.