US stock futures point to technology gains

Investors continued to turn their attention to bond markets following a fall in US government debt prices last week. Ten-year Treasury bills recovered some ground on Monday, bringing interest rates down to 1.682% from 1.729% on Friday. Yields fall when bond prices rise.

Revenues rose for seven consecutive weeks, hurting segments of the stock market that had benefited from years of low interest rates. Tech stocks, in particular, have suffered from the increase in longer-term government borrowing costs. Future earnings are worth less when bond yields rise.

Tech stocks, including Apple, rose for the clock, as did electric vehicle manufacturer Tesla, another beneficiary of low bond yields.

Kansas City Southern Railroad jumped 17% in premarket trade after agreeing to be acquired by Canadian Pacific Railway in a transaction valued at approximately $ 25 billion.

The tech-dominated Nasdaq-100 slid to its fourth week of losses in five on Friday. Many investors expect bond yields to continue to rise as the economy accelerates, challenging technology stocks that have pushed the broader market higher in 2020.

“There is more upward for US bond yields than downward,” said Edward Smith, head of asset allocation research at British investment firm Rathbone Investment Management. Stocks “that delivered exceptional returns last year are unlikely to do very well for the time being,” added Mr. Smith.

According to Mr. Smith, that doesn’t mean investors should leave tech stocks. Shares of giants like Apple, Microsoft and Facebook have proved resilient on some days when government bond yields have risen, he said. However, Mr. Smith added that money managers should be cautious about corners of the market with high valuations, such as stocks in electric vehicle companies.

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

Data on sales of existing homes is expected at 10 a.m., giving investors a fresh look at the booming housing 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% and traded at 7.96 per dollar after replacing the country’s largest central banker late last week. The decline may contribute to investors’ nervousness about emerging market assets, says Jane Foley, head of currency strategy at Rabobank.

Coupled with concerns about the course of US Treasury yields, the decline in the Turkish currency means that there is “plenty of room for turbulent trading conditions” in broader financial markets, Ms Foley said.

In overseas markets, the Stoxx Europe 600 remained virtually unchanged. AstraZeneca’s shares were up 1.5% after the UK drug company said its Covid-19 vaccine was safe and 79% effective at preventing symptomatic disease in US clinical trials.

Shares of airlines, including International Consolidated Airlines Group, owner of British Airways, fell after British officials and scientists raised doubts about the likelihood of international travel this summer. Several countries in mainland Europe are struggling with an end to vaccination programs and a jump in coronavirus cases.

Asian markets were mixed towards the end of trading. The Shanghai Composite Index in China rose 1.1%, while the Hang Seng Index in Hong Kong tipped 0.4% lower. Japan’s Nikkei 225 fell 2.1%, led lower by automakers after a fire at a plant of semiconductor maker Renesas Electronics

Write to Joe Wallace at [email protected]