In the long run, US futures fell, with investors selling government bonds and high-tech stocks, a day after the Dow Jones industrial average closed above 33,000 for the first time.
S&P 500 futures fell 0.4% after a broad market margin hit a record high on Wednesday. Nasdaq-100 futures fell more than 1%, indicating losses for the technology sector after three days of gains. Dow Jones Industrial Media futures rose 0.1% more. The benchmark for blue-chip stocks reached a new benchmark after the Federal Reserve committed to maintaining its light money policies.
Investors continued to sell US 10-year notes in a bet that inflation will rise as the economy recovers, reducing the value of fixed-income investments. The yield on 10-year treasury bills ticked up to 1.721%, after rising to 1.641% on Wednesday, the highest in recent years. The yield, which increases as bond prices fall, was up 0.915% near the beginning of the year.
“It’s about inflation expectations: receiving inflation expectations beyond the Fed’s target is frightening in bond markets,” said Edward Park, investment director at Brooks Macdonald.
In recent weeks, rising bond yields and growing investor optimism that the economy will return quickly have reduced their appetite for technology-rich stocks. Instead, it looks at sectors such as banks, airlines and energy companies, which could benefit more when social and business activity begins. Federal Reserve officials said Wednesday that they expect the economy to recover faster than a few months ago, backing those bets.
“Powell and the Fed have done a pretty good job of navigating an uncertain market and have delivered enough to ensure that stock volatility does not increase, but that said it has not put a cap on yields,” he said. Park.
US data on jobless claims for the week ending March 13, which will take place at 8:30 AM ET, will give investors an insight into the health of the labor market. First-time claims for unemployment benefits are close to the lowest level since the pandemic, but remain historically high. Economists polled by The Wall Street Journal expect jobless claims, a dismissal prosecutor, to fall to 700,000 last week from 712,000 the previous week.
Rising bond yields and growing economic optimism have curbed the appetite for high-tech stocks.
Photo:
carlo allegri / Reuters
“The thing to look at is the number of jobs, and the central banks are looking at everything,” said Michael Matthews, a fixed-income fund manager at Invesco. “The Fed and all central banks have decided that it is better to keep the economy warm, to help the recovery, to get unemployment as low as possible.”
Bond investors are betting that the Fed will raise interest rates over the next two years, despite Wednesday’s data showing that most policymakers still expect to keep interest rates ultra-low until 2023. Only seven of the 18 Fed officials they anticipated raising rates in 2022 or 2023, rising from five in December.
“Fed [officials] it is trying to stay afloat for the next three years, but the market is trying to challenge that, ”said Mr Matthews. “Risky assets will remain strong, provided the Treasuries do not sell too much.”
Meanwhile, rising inflation expectations are sending investors looking for higher returns and leading them to avoid safer assets, such as government bonds, he added. “This morning, the markets woke up and decided whether the Fed would keep the policy so weak that they want a higher risk premium,” Mr Matthews said.
Abroad, the pan-continental Stoxx Europe 600 rose 0.4%.
The Bank of England is expected to keep interest rates unchanged when officials release their monetary policy decision at 8am ET.
In Asia, most major landmarks have closed above. China’s Shanghai Composite Index added 0.5%, while Hong Kong’s Hang Seng added 1.3%. Australia’s S&P / ASX 200 fell 0.7%.
Write to Caitlin Ostroff to [email protected]
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8