Wall Street set to open lower as Treasury yields jump

By Medha Singh

(Reuters) - U.S. stocks were set to open lower on Thursday after robust economic data and optimistic views from the Federal Reserve pushed government bond yields to multi-year highs, while curbing the appetite for stocks globally.

The 10-year U.S. Treasury yield recorded its biggest daily jump since the 2016 U.S. presidential election on Wednesday after activity in the service sector hit a 21-year high and ADP private payrolls data for September came in stronger than expected.

Comments from Fed Chairman Jerome Powell who said the U.S. economy can expand for "quite some time" also helped the yield rise further.

The upbeat views raised expectations for a faster pace of monetary tightening, with odds for a fourth interest rate hike in December getting a boost.

Rising bonds yields make stocks less attractive, especially those of high dividend-paying companies such as real estate and utilities.

"With valuations still elevated compared to historic levels, it requires an upbeat earnings season for stocks to maintain their bullish momentum," said Hussein Sayed, chief market strategist at FXTM. "Risks are growing with borrowing cost on the rise and fixed-income markets looking very attractive."

The S&P 500 was less than a point shy of hitting a record on Wednesday, before rising yields led to a pullback.

Investors will keep a close eye on the U.S. jobs data on Friday for further clues on the path of interest rate hikes.

"Yields are giving the markets a chance to take a breather at very high levels. I think we will have a defensive, bumpy session going into Friday's unemployment data," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

At 8:37 a.m. ET, Dow e-minis were down 113 points, or 0.42 percent. S&P 500 e-minis were down 12.5 points, or 0.43 percent and Nasdaq 100 e-minis were down 46 points, or 0.6 percent.

Out of the 27 stocks trading premarket on the Dow, 24 were lower.

However, Banks stocks, whose profits typically get a boost from higher interest rates, eked out gains with Citigroup, JPMorgan and Bank of America rising between 0.4 percent and 0.5 percent.

Constellation Brands shares jumped 3.6 percent after the Corona beer maker raised its full-year profit forecast and topped Wall Street's estimates for second-quarter sales and profit.

Eli Lilly rose 3.3 percent after the company's experimental diabetes drug showed promise in a mid-stage trial. Snap Inc fell 4.5 percent after two brokerages raised concerns over Snapchat's declining user trends.

Data due at 10:00 a.m. ET include the Commerce Department's report for factory goods orders, which is expected to rise 2.1 percent in August after a 0.8 percent fall in July.

(Reporting by Medha Singh in Bengaluru; Editing by Anil D'Silva)