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US STOCKS-Futures drop as rate worries keep Treasury yields near recent peaks

(For a Reuters live blog on U.S., UK and European stock markets, click or type LIVE/ in a news window.)


DraftKings rises on brokerage upgrade


China ADRs fall on economic, geopolitical woes


Futures down: Dow 0.46%, S&P 0.54%, Nasdaq 0.62%

(Updated at 7:12 a.m. ET/1112 GMT)

By Ankika Biswas and Shashwat Chauhan

Sept 26 (Reuters) - U.S. stock index futures declined on Tuesday as investors continued to grapple with the prospects of a prolonged restrictive monetary policy by the Federal Reserve and its subsequent impact on the economy.

Adding to investor anxiety was the likelihood of a partial shutdown of the U.S. government by Sunday, which according to ratings agency Moody's is likely to be a "credit negative".

Megacap growth stocks including Apple, Microsoft , Meta Platforms and Tesla lost between 0.5% and 1.3% in premarket trading. shares also dipped 0.5% after boosting Wall Street on Monday on its plans to invest in the high-profile startup, Anthropic.

At 7:12 a.m. ET, Dow e-minis were down 157 points, or 0.46%, S&P 500 e-minis were down 23.75 points, or 0.54%, and Nasdaq 100 e-minis were down 92.25 points, or 0.62%.

All three major U.S. stock indexes are set to log quarterly declines for the first time this year heading into the last trading days of September.

Pressuring equities, the benchmark two- and 10-year Treasury yields have scaled multi-year highs after the Fed's hawkish longer-term rate outlook, a stance also projected by other major central banks.

"There is a growing sense of despondency that rates will not come down any time soon, and that they will remain in restrictive territory for an extended period, hampering growth and making for a more difficult economic environment for companies to operate in," said Stuart Cole, chief macro economist at Equiti Capital.

Traders' bet on the benchmark rate remaining unchanged in November and December stood close to 80% and 59%, respectively, according to CME's FedWatch tool. Meanwhile, a 25-basis-point rate cut is being priced in as early as March, growing to over 33% in June and July.

Investors will keep an eye out for the consumer confidence index for September and a report on new home sales for August, due after the opening bell.

Through the week, data including on durable goods, the personal consumption expenditures price index for August, second-quarter gross domestic product, as well as remarks by Fed policymakers such as Chair Jerome Powell will be monitored.

Minneapolis Fed President Neel Kashkari on Monday noted the need for raising borrowing costs to tame inflation in light of a surprisingly resilient economy, while Chicago Fed chief Austan Goolsbee in a CNBC interview said inflation above 2% target remains a greater risk than the scope of a slowing economy.

Meanwhile, a Goldman Sachs report showed hedge funds increased their bearish bets mainly on U.S. stocks last week, with clients mostly adding short positions and getting rid of long positions. Consumer discretionary, industrials and financials were the most net sold.

U.S.-listed shares of Chinese firms, PDD Holdings and Xpeng were down between 1.3% and 3% on economic concerns and geopolitical tensions.

DraftKings rose 3% after J.P. Morgan upgraded the online sports and gaming company's stock to "overweight" from "neutral". (Reporting by Ankika Biswas and Shashwat Chauhan in Bengaluru; Editing by Maju Samuel)