Stock Futures – U.S. stock futures under pressure as bond yields resume rise
U.S. stock-index futures edged lower Tuesday, with technology shares seen likely to come under pressure after Treasury yields saw a renewed rise.
What are major indexes doing?
Futures on the Dow Jones Industrial Average
fell 32 points, or 0.1%, to 33,000.
S&P 500 futures
were off 11.40 points, or 0.3%, at 3,947.50.
declined 92.25 points, or 0.7%, to 12,852.25.
On Monday, the Dow
flipped positive in afternoon trade to end the day up 98.49 points, or 0.3%, to close at a record 33,171.37. The S&P 500
ended the session down 0.1%, while the Nasdaq Composite
dropped 0.6% and the small-cap Russell 2000
What’s driving the market?
A renewed selloff in U.S. Treasurys overnight was driving activity across markets Tuesday. The yield on the 10-year Treasury note
early Tuesday traded above 1.77% for the first time since January 2020 and remained up nearly 6 basis points near 1.769%, according to FactSet.
Rising yields were lifting the U.S. dollar and weighing on technology stocks and other growth-oriented shares. Technology and growth stocks are more sensitive to rising bond yields as the net present value of their future earnings growth is reduced by the higher discount rate implied by rising bond yields.
“The latest moves seem tied to resurgent concerns around inflation. Market-based inflation measures have shot higher as well, perhaps as investors brace for Biden’s multi-trillion infrastructure announcement tomorrow,” said Marios Hadjikyriacos, investment analyst at XM, in a note. President Joe Biden is slated to unveil details of his infrastructure plan in a speech in Pittsburgh on Wednesday.
“Coming on top of the latest avalanche of federal spending, such an enormous investment package could turbocharge economic growth and by extension inflationary pressures,” he said.
Biden’s infrastructure plan, meanwhile, is expected to cost as much as $3 trillion to $4 trillion, offset by tax hikes of up to $3 trillion.
Read: Here’s what tax hikes could mean for the stock market as Biden pushes infrastructure plan
Meanwhile, investors were on the lookout for any further selling of stocks after a large margin call on equity derivatives held by Archegos Capital Management that forced an estimated $30 billion in block sales, triggering plunges in shares of widely held media companies whose stocks were liquidated. Big bank shares were also dented due to worries about their exposure to Archegos.
Read: Here are the complex bets at the heart of ‘unprecedented’ Archegos-linked $30 billion margin call
The U.S. economic calendar features the Case-Shiller home-price index for January at 9 a.m. Eastern. A March consumer-confidence index is due at 10 a.m.
Randal Quarles, Fed vice chair for supervision, is scheduled to deliver remarks at 9 a.m., while New York Fed President John Williams is slated to speak at 2: 30 p.m.
Which companies are in focus?
Shares of ViacomCBS Inc.
were up more than 1% in premarket trade after falling nearly 7% Monday and suffering steep losses last week in moves tied to the Archegos liquidation.
Shares of Goldman Sachs Group Inc.
and Morgan Stanley
were up slightly in premarket action. The banks moved large blocks of assets before other large banks that traded with Archegos Capital Management, as the scale of the hedge fund’s losses became apparent, according to The Wall Street Journal, helping to limit their losses amid the stock liquidation.
PayPal Holdings Inc.
shares edged higher after the payments company said it would start letting U.S. customers purchase items with cryptocurrencies.