In the long run, US futures rose as technology stocks prepared to drive the recovery, as bond markets calmed down and the 10-year Treasury yield fell from a 14-month high.
The S&P 500 futures rose 0.2%, leaving the broad market index on track for a warm decline this week. The track closed 1.5% on Thursday. Nasdaq-100-related contracts rose 0.6%, suggesting that technology stocks would share their losses. Dow Jones Industrial Media futures rose 0.1%, leaving the blue-chip index on track for the third week in a row.
On the bond market, the 10-year Treasury benchmark yield fell to 1.682% after closing at 1.730% on Thursday, the highest level since January 2020.
Major indices were shaken this week, affected by the booming economic outlook on the one hand and bond investors’ concern that interest rates will rise faster than expected on the other. Investors are betting that inflation will rise as growth rises and remain high enough to force the Federal Reserve to tighten monetary policy. These concerns led to a sharp sell-off on the government bond market on Thursday and prompted investors to abandon technology and other high-growth stocks.
“After a bit of significant sales, investors tend to lick their wounds and wake up and say, is this a real sale or a temporary hit on the road?” said Gregory Perdon, co-head of investment at private bank Arbuthnot Latham.
Earnings from stock futures on Friday are “indicative that investors see it as just a swell on the road.”
Treasury yields have risen over the past three consecutive days as investors have sold bonds in anticipation of higher inflation. An increase in treasury supply as the government funds billions of dollars in Covid-19 aid spending, combined with uncertainty over whether the Fed will extend temporary regulatory aid to large banks, has also dampened appetite for bonds.
“Investors believe that there will be some inflation, which tends to be bad for bonds: you tend to lose money if there is an inflationary environment and you have government bonds,” Mr Perdon said. “So, in the end, the investors tried to cope with that move.”
In premarket trading, FedEx rose 3.5% after the package giant said its quarterly profit nearly tripled. Nike fell 2.6% after the sneaker company reported revenue that did not exceed analysts’ expectations due to shipping delays caused by lack of containers and port congestion.
Abroad, the Stoxx Europa 600, continental, fell 0.4%. Delays in launching the vaccine in Europe weigh on growth expectations in the region, investors said.
“In a macro sense, it is difficult to see how Europe will overcome,” said Seema Shah, chief strategist at Principal Global Investors.
Travel companies in Europe have fallen after France announced another blockade for the area around Paris and other regions. TUI fell 6.3%, Paris Airports fell 4.5% and Deutsche Lufthansa fell 4.4%.
In Asia, most major benchmarks fell at the close of trading. The Shanghai Composite Index fell 1.7% and Hong Kong’s Hang Seng fell 1.4%.
The first high-level talks between the Biden administration and Chinese officials are underway in Alaska, with both sides trading criticism. Investors are worried about continuing tensions between the two major economies.
“The tone suggests that the US-China relationship will be as strained as in the previous US administration,” Ms Shah said. “As we have seen in recent years, this strained relationship has meant that they will have more struggles than otherwise and it affects those around them and in supply chains.”
Major indicators were shaken this week.
Photo:
Courtney Crow / Associated Press
Write to Anna Hirtenstein at [email protected]
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