US stock futures ticked higher, with technology stocks poised to lead the recovery, as bond markets calmed down and 10-year government bond yields fell from a 14-month high.
S&P 500 futures were up 0.2%, putting the broad market index on track for a lukewarm decline this week. The meter closed 1.5% on Thursday. Contracts pegged to the Nasdaq-100 were up 0.6%, suggesting technology stocks would absorb their losses. Dow Jones Industrial Average futures were up 0.1%, keeping the blue chip index on track for a third straight week.
In the bond market, the benchmark 10-year Treasury yield fell to 1.682% after finishing at 1.730% on Thursday, the highest level since January 2020.
Major indices have been choppy this week, plagued by improved economic outlook on the one hand and bond investors’ concerns that interest rates will rise sooner than expected. Investors are betting that inflation will rise as growth picks up, remaining high long enough to force the Federal Reserve to tighten monetary policy. Those concerns led to a sharp sell-off in the government bond market on Thursday, prompting investors to get out of technology and other high-growth stocks.
“After a little bit of sales, investors tend to lick their wounds and wake up and say, is this a real sellout or a temporary outage?” said Gregory Perdon, co-chief investment officer at private bank Arbuthnot Latham
Stock futures gains on Friday are “indicative that investors think it’s just a bump in the road.”
Government bond yields have risen for the past three consecutive days as investors sold bonds in anticipation of higher inflation. A jump in government bond supply as the government funds trillions of dollars in Covid-19 aid spending, combined with uncertainty as to whether the Fed will provide temporary regulatory relief for major banks, has also dampened interest in bonds.
“Investors believe there is going to be some inflation, which is usually bad for bonds: you tend to lose money when there is an inflationary environment and you own government bonds,” said Mr Perdon. “So in the end, investors have tried to get ahead of that step.”
In premarket trade, FedEx rose 3.5% after the package giant said its quarterly profit nearly tripled. Nike fell 2.6% after the sneaker company reported revenues that fell short of analyst expectations due to shipping delays due to container shortages and port congestion.
Abroad, the pan-continental Stoxx Europe 600 fell by 0.4%. Delays in vaccine roll-out in Europe weigh on expectations for growth in the region, investors said.
“From a macro standpoint, it’s hard to see how Europe will outperform it,” said Seema Shah, chief strategist at Principal Global Investors.
Travel companies in Europe fell after France announced another lockdown for the Paris area and several other regions. TUI fell by 6.3%, Aeroports de Paris with 4.5% and Deutsche Lufthansa with 4.4%.
In Asia, most of the major benchmarks fell towards the end of trading. The Shanghai Composite Index was down 1.7% and Hong Kong’s Hang Seng was down 1.4%.
Initial high-level talks between the Biden government and Chinese officials are underway in Alaska, with both sides exchanging criticism. Investors are nervous about the ongoing tensions between the two major economies.
“The tone suggests that the relationship between the US and China will be just as tense as it was with the previous US administration,” said Ms Shah. “As we’ve seen over the years, that tense relationship has meant that they will have some more problems than usual, and it is also affecting the people around them and within their supply chains.”
Major indexes have been choppy this week.
Photo:
Courtney Crow / Associated Press
Write to Anna Hirtenstein at [email protected]
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