U.S. equities futures rose on Tuesday as a recent sale of government bonds stalled and technology giant stocks regained ground.
Futures tied to the S&P 500 gained more than 1%, suggesting that the broad market benchmark may increase after the opening of New York. Dow Jones Industrial Average futures rose 0.4%. On Monday, the chip index set a new intraday record.
Nasdaq-100-related futures rose 1.8% on Tuesday, indicating that tech stocks are likely to pick up. The heavy technology index and the broader Nasdaq composite index fell on correction territory on Monday, meaning the indicators have fallen more than 10% from recent highs.
Technology stocks have come under pressure in recent weeks as a wave of sales in the bond market raised Treasury yields. This led investors to question the high valuations that the technology sector is trading after the sharp rise in 2020.
The 10-year Treasurys yield fell to 1.542% on Tuesday. It had finished the previous day at 1.594%, its highest level in more than a year.
Stabilization of bond markets is likely to help technology stocks recover some of their losses, investors said. Money managers expect many companies in the industry to continue to benefit from increased online shopping and home access to media, entertainment and computer options, even when Covid-19 locks are facilitated.
“It’s that buying mindset,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management. “It’s not like we’ve changed our long-term view of technology. Everyone expects it to work well: it was very expensive.
U.S. lawmakers are on track to approve the latest version of the $ 1.9 trillion coronavirus stimulus package later this week. This has increased investor confidence in the outlook for the economy and boosted demand for shares in companies that are likely to benefit from the economic rebound, such as banks and energy producers.
This rotation caused the Dow, which has a heavier weight towards cyclical sectors, to reach its second highest close in history on Monday.
Some investors expect bond markets to calm as the appetite for U.S. public debt revives after the sharp rise in yields. The ten-year Treasury yield was as low as 0.915% near the beginning of the year.
“We believe a large part of the bond yield movement has been played out,” said Hani Redha, portfolio manager at PineBridge Investments. “At this level of performance, we expect additional buyers to arrive. This tends to stabilize the level of performance.”
Abroad, the pan-continental Stoxx Europe 600 rose 0.4%.
In Asia, most major indices were mixed at the close of trading. Shanghai Composite fell 1.8% and South Korean Kospi fell 0.7%. The Japanese Nikkei 225 advanced 1%.
The New York Stock Exchange on Monday.
Photo:
Lev Radin / Zuma Press
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