U.S. stock futures fell on Thursday as investors awaited comments from Federal Reserve Chairman Jerome Powell on inflation prospects and the central bank’s views on rising bond yields.
Futures tied to the S&P 500 fell 0.4%, suggesting the benchmark may fall for the third day in a row after the opening bell. Contracts related to the Nasdaq-100 fell 0.6%, signaling the loss of technology stocks. Dow Jones Industrial Average futures fell 0.3%.
A recent sale of government bonds has raised Treasury yields, curbing investors ’appetite for technology stocks that had skyrocketed in a low-yield environment. Some money managers are betting on an additional fiscal stimulus in the United States that will raise inflation and cause the Fed to raise interest rates sooner than expected. This has led to a jump in real yields or bond yields after adjusting for inflation expectations.
Investors say they expect Powell to answer questions about how he sees the yield jump when he speaks at the Wall Street Journal Jobs summit at 12:05 pm ET. Central bank officials have previously said they will keep monetary policy weak until the economy is stronger and consider rising bond yields a sign that investors are optimistic about the US economic recovery.
“Powell’s comments today will be really important,” said Hugh Gimber, strategist at JP Morgan Asset Management. “Clearly, what we’re seeing in recent weeks is that stocks are being disrupted by the pace of rising real yields, and that puts the Fed in a difficult space.”
Comments from the Fed presidency will also provide one of the last opportunities for markets to meet key policymakers before a period of shutdown begins before the next monetary policy review in mid-March. “This is their real opportunity, before the next Fed meeting, to give investors clarity on how the Fed sees the bond market,” he added.
The yield on the US Treasury note at ten years fell to 1.464%. On Wednesday it had jumped to 1.469%, the second highest level this year, and ended with three days of decline. This level marks a sharp rise since early January, when it was as low as 0.915%. Yields increase as bond prices fall.
US economic growth expectations have been bolstered by the proposal for a $ 1.9 trillion Covid-19 aid package. Senate Democrats agreed Wednesday to restrict eligibility for some of the direct payments that are part of the bill, a grant to centrists who need their support to pass it.
“You basically have a fiscal stimulus toward consumption, which means profits can increase and they will support equity markets,” said Esty Dwek, head of global market strategy at Natixis Investment Managers.
He said he expects sectors such as banks that would benefit from economic reopening to perform well when investors come out of high-value technology stocks. “Index title numbers sometimes mask that there has been more of a rotation in equity rather than out of equity.”
A trader worked Wednesday on the floor of the New York Stock Exchange.
Photo:
Courtney Crow / Associated Press
The stimulus package should also increase support for the unemployed, which will bolster consumer spending and the economic recovery, Ms. Dwek.
New data on the number of Americans applying for unemployment benefits for the first time during the week ending Feb. 27 will be presented at 8:30 p.m.
Abroad, the Stoxx Europe 600 pancontinental fell 0.7%.
Most major Asian markets fell at the close of trading in a technology-led sale that reflected Wednesday’s trading in the US
In Japan, SoftBank Group Corp.
fell more than 5%, which helped reduce the Nikkei 225 by more than 2%. In Hong Kong, Chinese technology giant Tencent Holdings lost more than 4%, while the city-centered Hang Seng Tech index fell more than 5%. Major market benchmarks in Australia, South Korea and mainland China also fell.
According to Justin Tang, head of Asian research at United First Partners in Singapore, Justin Tang, head of Asian research at United First Partners in Singapore, worried markets about uncertainty about the pace of global economic recovery and concern that accelerating inflation could lead to higher interest rates.
“On the one hand, you want the economy to grow, but the massive cash flow of the economy increases the inflation boogeyman,” he said. “I’m not sure if the economy can get higher interest rates right now. We are recovering, but I am sure we are not out of the woods yet, “he added.
Tang said the recent withdrawal was reminiscent of 2018, when the tech sector sold out as bond yields increased, though he noted the episode quickly eased.
—Joanne Chiu contributed to this article.
Write to Caitlin Ostroff to [email protected]
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