Stock futures tick lower ahead of new Powell testimonial

Stock markets have been shaking in recent days after a strong start to the year, with leading tech companies leading the way in the decline. Investors said an increase in government bond yields, driven by improved growth outlook and rising inflation expectations, has accelerated the rotation of the technology stocks that drove the markets higher during the pandemic to the ones best placed to take advantage of an end to lockdowns.

“This is really a function of economies reopening,” said Brian O’Reilly, head of market strategy at Mediolanum Investment Funds. “Bond yields are on the rise thanks to good vaccination coverage in the US and the UK, and it leads to an easy rotation from everything it did well last year, the stay-at-home stocks, to those who didn’t, the go-outside stocks.”

“It’s a good story in some ways, in that the market is trying to price in the sense that economies are reopening,” he added.

The yield on the 10-year benchmark Treasury bill, which moves inversely with price, has risen to its highest level in a year this week. On Wednesday it rose to 1.411% from 1.363% on Tuesday.

Mr Powell on Tuesday reaffirmed his commitment to keep easy monetary policy unchanged for the foreseeable future, which helped limit heavy losses at technology companies. Investors await a second day of testimony Wednesday before the Senate Banking Committee. Mr. Powell will speak at 10 a.m. ET.

While the Fed has kept the same message since the pandemic hit, the strength of the recovery could prompt it to change course sooner than many investors expected, said Paul O’Connor, head of multi-asset management at Janus Henderson Investors.

“Markets expect this to be a 2022 story, but we are seeing significant upgrades to US GDP. The discussion about tapering will have to take place sometime in the middle of this year, ”he said.

Wednesday is the last batch of income reports. Nvidia

Booking Holdings and L Brands will publish their reports after the markets close.

PRA Health Sciences jumped more than 20% to the opening bubble after Dublin-based Icon said it would buy the company in a deal worth about $ 12 billion.

Square fell 2.9% in premarket moves after the payments company reported lower fourth-quarter earnings late Tuesday.

Data on new home sales will also be parsed when released at 10 a.m. ET. The US housing market performed well during the pandemic, helped by strong demand and low mortgage rates.

Bitcoin rose 3.9% to $ 49,889.73 on Wednesday after a 13% drop on Tuesday. Other cryptocurrencies that fell on Tuesday, such as ether, also won.

In premarket trade, Tesla rose 4.5%. The company’s stock price has fluctuated along with bitcoin in recent days after the electric vehicle manufacturer said it bought $ 1.5 billion worth of cryptocurrency.

Abroad, the pan-continental Stoxx Europe 600 index rose 0.5%.

Companies poised to take advantage of an end to exercise restrictions were among the strongest performers. Travel agency TUI was up 8.5%, while UK-listed shares of cruise line Carnival added 7.4%. Dufry

a duty-free store operator gained 7.6% and airline IAG rose 4.4%.

Asia Pacific indexes declined. The biggest losses occurred in Hong Kong, where the city’s government seized on booming markets by raising a tax on stock trading. Hong Kong’s benchmark Hang Seng Index was down 3%, while Hong Kong Exchanges and Clearing was down 8.8%, even as the exchange operator revealed record annual sales and net profit.

Mainland China’s CSI 300, which includes major companies listed in Shenzhen or Shanghai, fell more than 2.5%, while index heavyweight Kweichow Moutai was down more than 5%. The index has now fallen for four out of five sessions since the Lunar New Year break. The Japanese Nikkei 225 fell 1.6%.

Andy Maynard, chief of stocks at China Renaissance Securities, said investors were worried about expensive valuations following rapid rises in mainland China and Hong Kong markets, especially against the backdrop of rising bond yields. As a potential sign of increasing caution, he noted, “You don’t see institutions buying on the dip.”

—Caitlin Ostroff contributed to this article.

Write to Will Horner at [email protected] and Xie Yu at [email protected]