US Futures Stock indicates gains for technology

Investors continued to focus on bond markets after a drop in the price of US government debt last week. Ten-year treasury notes recovered some of the ground on Monday, sending yields to 1.682% from 1.729% on Friday. Yields fall as bond prices rise.

Yields have risen for seven consecutive weeks, affecting stock market segments that have benefited from several years of low interest rates. Technical actions, in particular, have suffered from rising longer-term government borrowing costs. Future gains are worth less when bond yields rise.

Technology stocks, including Apple, rose before the bell, as did electric vehicle maker Tesla, another beneficiary of depressed bond yields.

Railroad Kansas City Southern grew 17% in premarket trading after agreeing to be bought by the Canadian Pacific Railway in a deal valued at about $ 25 billion.

The technology-dominated Nasdaq-100 ran from Friday to the fourth week of losses in five. Many investors expect bond yields to continue to rise as the economy grows, posing a challenge to the technology stocks that fueled the wider market in 2020.

“There are more benefits to US bond yields than there is a downside,” said Edward Smith, head of asset allocation research at UK investment firm Rathbone Investment Management. Shares “that provided exceptional returns last year probably won’t do so well at the moment,” Mr Smith added.

That doesn’t mean investors should give up on technology, according to Smith. Shares of giants such as Apple, Microsoft and Facebook proved resilient on some days when Treasury yields rose, he said. However, Mr Smith added that money managers should be cautious about high-priced market corners, such as the shares of electric vehicle companies.

The Federal Reserve has so far indicated that it is not concerned about rising bond yields. President Jerome Powell is scheduled to speak at a discussion on central bank innovation hosted by the Bank for International Settlements, starting at 9 a.m. ET.

Data on existing home sales are due at 10 a.m., giving investors a new perspective on the booming real estate market. Economists expect sales to fall in February, hampered by rising prices and bad weather in parts of the country.

In currencies, the Turkish lira fell more than 9% to trade at 7.96 per dollar, after replacing the country’s top central banker at the end of last week. The slide could increase investor nervousness about emerging market assets, according to Jane Foley, head of foreign exchange strategy at Rabobank.

Combined with concerns about the trajectory of US government bond yields, the decline in Turkey’s currency means there are “plenty of opportunities for hectic trading conditions” in the broader financial markets, Ms Foley said.

In the overseas markets, the Stoxx Europe 600 remained almost unchanged. AstraZeneca shares rose 1.5% after the British doctor said that the Covid-19 vaccine proved to be safe and 79% effective in preventing symptomatic diseases in US clinical trials.

Shares of airlines, including the owner of British Airways International Consolidated Airlines Group, fell after British officials and scientists questioned the likelihood of international travel this summer. Several continental European countries are facing a halt to vaccination programs and a jump in coronavirus cases.

Asian markets were mixed until the end of transactions. China’s Shanghai Composite Index rose 1.1%, while Hong Kong’s Hang Seng Index ticked 0.4% lower. Japan’s Nikkei 225 fell 2.1%, driven lower by carmakers after a fire at a factory owned by semiconductor manufacturer Renesas Electronics.

Write to Joe Wallace at [email protected]