Futures of U.S. stock markets fell on Tuesday as investors awaited the testimony of Federal Reserve Chairman Jerome Powell at Congress on the health of the economy.
Futures tied to the S&P 500 fell 0.1%. Monday’s benchmark indicator fell for the fifth day in a row, the longest loss streak since last February. Nasdaq-100 contracts fell 0.6%, suggesting technology stocks will continue to lead the market downward.
A sharp rise in U.S. government bond yields in recent days has undermined investors ’appetite for riskier assets, including equities. The actions of technology companies, which have driven the broader market for much of last year, are considered particularly vulnerable. This is because the valuations of many technology companies are tied to their future profit potential. These benefits are less valuable in current terms when investors apply a higher discount rate.
The increase in bond yields “naturally causes investors and markets to re-examine the stock’s vision,” said Paul Jackson, Invesco’s global head of asset allocation research. Investing in government bonds is starting to look more attractive for the first time in months, he said.
But “the level at which bond yields become really problematic for stocks is a long way from where we are now,” Jackson added.