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U.S. equity futures moved lower again Wednesday, potentially extending Wall Street’s slide into a third consecutive session, as central bank officials continue to push back on market expectations of deep interest-rate cuts over the coming months.

Stocks ended lower on Tuesday, trimming the S&P 500’s January gain to just 0.29%, as Treasury yields jumped in reaction to comments from Federal Reserve Gov. Christopher Waller, who stressed the need for patience in monitoring the path of inflation.

“We can take our time to make sure we do this right,” Waller told an event in Washington, adding that having to reverse course and hike rates later in the year would do more damage than waiting. 

A faster-than-expected reading for U.K. inflation over the month of December, which accelerated for the first time in 10 months, as well as more hawkish warnings from European Central Bank officials at the World Economic Forum in Davos, are testing the market’s consensus for six Fed rate cuts this year.

Benchmark 10-year Treasury note yields were last marked 2 basis points (0.02 percentage point) higher from yesterday’s close at 4.064%, while 2-year notes nudged 3 basis points higher to 4.281%.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, extended its recent run of gains to trade at a five-week high of 103.408.

Traders are also easing bets on a March rate cut, with CME Group’s FedWatch tool now suggesting a 59.5% chance of a quarter-point reduction in the federal funds rate, down from around 65% late last week. The federal funds rate currently sits between 5.25% and 5.5%.

The repricing of interest rate risks also has the market’s key volatility gauge, the VIX index, rising nearly 10% in the overnight session to a two-week high of $14.60.

Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 are indicating a 20-point opening-bell decline ahead of December retail sales data, expected at 8:30 am U.S. Eastern Time.

Futures tied to the Dow Jones Industrial Average, meanwhile, are priced for a 155-point decline while those linked to the tech-focused Nasdaq are indicating a 73-point pullback.

In overseas markets, China stocks extended declines from recent five-year lows following disappointing GDP data. The report showed that the world’s second-largest economy grew 5.2% last year but that an uneven post-covid recovery persisted, including a volatile property sector and muted domestic demand.

The MSCI ex-Japan index slumped 2.2% into the close of trading, trailed by a 0.4% decline for the Nikkei 225 in Tokyo.

In Europe, the Stoxx 600 was marked 1.23% lower, largely tracking Wall Street futures, in early Frankfurt trading, while Britain’s FTSE 100 slumped 1.67% as the pound rose to 1.268 against the dollar. 

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