US equity futures rebounded on Tuesday as a recent treasury sell-off ended and giant tech stocks recovered some ground.
Futures pegged to the S&P 500 gained more than 1%, suggesting the broad market benchmark may rise after the opening bubble in New York. Dow Jones Industrial Average futures were up slightly at 0.4%. The blue chips index set a new intraday record on Monday.
Futures pegged to the Nasdaq-100 were up 1.8% on Tuesday, indicating that technology stocks are likely to recover. The tech-heavy index and the broader Nasdaq Composite Index both fell into correction territory on Monday, meaning meters are down more than 10% from recent highs.
Technology stocks have come under pressure in recent weeks as a sell-off in the bond market pushed up government bond yields. That prompted investors to question the high valuations in the technology sector after its steep climb in 2020.
The return on the 10-year Treasurys fell to 1.542% on Tuesday. It had finished at 1.594% the day before, the highest level in more than a year.
The stabilization in bond markets is likely to help technology stocks recoup some of their losses, investors said. Money managers expect that many companies in the industry will continue to benefit from increased online shopping and home access to media, entertainment and computing options, even as the Covid-19 lockdown becomes easier.
“It’s this buy-the-dip mindset,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management. “It’s not like we’ve changed our long-term vision of technology. Everyone expects it to do well, it was just really expensive. ”
US lawmakers are on track to pass the latest version of the $ 1.9 trillion coronavirus stimulus package later this week. That has boosted investor confidence in the outlook of the economy and boosted demand for stocks in companies likely to benefit from the economic recovery, such as banks and energy producers.
This rotation sent the Dow – which is more heavily weighted to cyclical sectors – to record its second-highest closing price in history on Monday.
Some investors now expect bond markets to calm down as the appetite for US sovereign debt recovers following the surge in interest rates. The yield on 10-year Treasury bonds was only 0.915% at the start of the year.
“We think much of the shift in bond yields has taken place,” said Hani Redha, portfolio manager at PineBridge Investments. “At this level of revenue, we expect additional buyers to come in. That usually stabilizes the revenue level.”
Abroad, the pan-continental Stoxx Europe 600 recorded 0.4%.
In Asia, most major indices were mixed at the close of trading. The Shanghai Composite fell by 1.8% and the South Korean Kospi by 0.7%. The Japanese Nikkei 225 advanced 1%.
The New York Stock Exchange on Monday.
Photo:
Lev Radin / Zuma Press
Write to Caitlin Ostroff at [email protected]
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