US futures fell on Tuesday as investors waited for Federal Reserve Chairman Jerome Powell to testify in Congress about the health of the economy.
S&P 500 futures fell 0.1%. Monday’s stock benchmark fell for the fifth day in a row, the longest series of losses since February. Contracts for the Nasdaq-100 fell 0.6%, suggesting that technology stocks will continue to lead the market lower.
A sharp rise in US government bond yields in recent days has affected investors’ appetite for riskier assets, including equities. Shares in technology companies, which have fueled the wider market for much of the past year, are seen as particularly vulnerable. This is because the valuations of many technology companies are related to their future revenue potential. These profits are less valuable in current terms when investors apply a higher discount rate.
Rising bond yields “naturally drive investors and markets to reconsider their views on equities,” said Paul Jackson, global head of asset allocation research at Invesco. Investments in government bonds are starting to look more attractive for the first time in months, he said.
But “the level at which bond yields are becoming really problematic for equities is far from where we are now,” Mr Jackson added.