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(Reuters) – U.S. stock index futures were largely flat on Thursday as government bond yields hovered near recent highs on worries that major central banks could keep raising interest rates.

The benchmark S&P 500 and the tech-heavy Nasdaq closed lower on Wednesday, with megacap stocks leading declines as U.S. bond yields rose after the Bank of Canada (BoC) surprised markets with an interest rate hike. [US/]

Microsoft Corp slipped marginally in premarket trading, while Apple Inc and Amazon.com Inc inched up after Wednesday’s declines.

The 2-year Treasury yield, which tends to move in step with short-term rate expectations, rose for a third day to 4.56%, as investors await the Federal Reserve meet next week. [US/]

“Our view remains that the Fed will pause in June, but leave the door open for a July hike, keeping it data dependent. Eventually we don’t think the Fed will hike in July,” Jefferies strategist Mohit Kumar said.

“They (BoC) do support our view that inflation would be sticky for longer than what central banks want which would rule out any cuts in 2023.”

The CBOE Volatility index, also known as Wall Street’s fear gauge, edged up after dropping to a pre-pandemic low of 13.77 on Wednesday.

Traders see a 70% chance of the U.S. central bank holding interest rates at the current 5%-5.25% range in its June 13-14 policy meeting, according to CMEGroup’s Fedwatch tool, down from nearly 80% a week ago. They see a 50% chance of a rate hike in July.

The U.S. Labor Department is due to release inflation data on June 13, the first day of the Fed meeting. The numbers are expected to show consumer prices cooled slightly in May but core prices remained sticky.

Initial jobless claims data for the week ended June 3 is due later in the day.

The economically sensitive parts of markets including the Russell 2000 index of small-cap companies rallied 1.8% to a three-month closing high on Wednesday, as investors rotated out of growth stocks.

The Dow Jones transports index notched a six-week high, while the KBW Regional Banking index closed at a more than two-month peak.

At 5:47 a.m. ET, Dow e-minis were up 4 points, or 0.01%, S&P 500 e-minis were up 2.75 points, or 0.06%, and Nasdaq 100 e-minis were up 13 points, or 0.09%.

Meta Platforms Inc slipped 0.7% after EU industry chief Thierry Breton demanded that the social media giant take immediate action to tackle online child-sex content as its voluntary child protection code seems not to be working.

GameStop Corp shares slumped 18.4% after billionaire investor Ryan Cohen took over as executive chairman after the video game retailer ousted its CEO and posted a bigger-than-expected quarterly loss.

Lucid Group rose 2.3% after the U.S. luxury electric vehicle maker’s head of China operations, Zhu Jiang, said the company is preparing to enter the world’s largest auto market.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Vinay Dwivedi)

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