S&P 500 on track for third week of denials, led by Tech

Contracts associated with the tech-heavy Nasdaq-100 have been relatively flat, indicating that the industry may be struggling to get back on its feet at the opening bell.

Stocks have stumbled in recent weeks as a rise in bond yields raises the question of whether the low interest rates that have driven valuations for much of the past year can last much longer. Yields, which are rising as bond prices fall, have risen in response to expectations of an acceleration in growth and inflation as the economy recovers from the coronavirus pandemic.

The yield on 10-year Treasury bonds was roughly flat at 1.549% on Friday, compared to 1.547% on Thursday. That was the highest level of reference loan costs since February last year. The recent rise in interest rates came after Federal Reserve Chairman Jerome Powell gave no sign that the central bank would try to stop the rise when he spoke at The Wall Street Journal Jobs Summit.

“It’s all about bond yield movements. It’s all about Jerome Powell, ”said Edward Park, Brooks Macdonald’s chief investment officer. “There is currently a tremendous degree of uncertainty in the market as to whether inflation is generally expected in the short term. is transient or lasts longer. “

According to Mr. Park, bond yields are likely to continue to rise and stocks may remain nervous unless the Fed takes concrete steps to limit interest rates. “Markets are most volatile when they are not sure how monetary and fiscal policies will respond.”

Technology stocks have suffered the most in recent weeks from the shift in sentiment. The Nasdaq Composite Index, a well-watched industry barometer, fell to its lowest level since January 4 on Thursday. The index ended the day down 9.7% from its February 12th high, falling just outside the correction area.

Ahead of the bell in New York, Gap’s shares were up nearly 5%. Firm executives predicted a recovery in clothing sales in the second half of the year after a difficult 2020 at the end of Thursday.

Broadcom shares fell nearly 2% in premarket trading after the company’s chip sales fell just below Wall Street estimates. Shares of energy companies, including Exxon Mobil and Occidental Petroleum, were boosted by rising oil prices following an unexpected decision by OPEC and its partners to implement production cuts in April.

Investors will later analyze the February jobs report, which will be released at 8:30 a.m. ET. The economy is expected to have created 210,000 jobs last month. That would contribute to signs of a slow improvement in the labor market, after data on Thursday showed that claims for unemployment benefits hit their lowest level in three months.

The jobs report may not affect bond yields much, as the data is unlikely to affect the progress of the Biden government’s stimulus package through the Senate, said Lyn Graham-Taylor, senior interest rate strategist at Rabobank. The Senate advanced the $ 1.9 trillion bill on Thursday after making a series of amendments, and is expected to pass its approval within days.

According to Mr. Graham-Taylor, yields are likely to continue to grow. “So far, the Fed has stressed that it doesn’t like it, but that it is quite comfortable with it,” he said. “In the back of their mind, it’s normal for yields to rise a bit: we’re not in the eye of the storm as we were.”

Oil prices rose for a second day after OPEC and a Russia-led coalition of oil producers sustained most of their production cuts, taking the market by surprise. Brent crude, the benchmark in the international energy markets, rose 2.7% to $ 68.52 a barrel.

Abroad, the pan-continental Stoxx Europe 600 recorded 0.2%. Of individual stocks in the region, the London Stock Exchange Group fell 8.8% after profit in the second half fell short of analyst forecasts and costs exceeded expectations.

Major Asian indices ended the day lower. Japan’s Nikkei 225 tipped 0.2% lower, while Hong Kong’s Hang Seng index fell nearly 0.5%.

Write to Joe Wallace at [email protected]