Stock futures decline after averages drop as bond yields rise
US stock index futures fell during overnight trading on Wednesday, accelerating losses from the regular trading session, which saw key averages across the board in the red.
Futures contracts linked to the Dow Jones Industrial Average lost 41 points. S&P 500 futures and Nasdaq 100 futures were down 0.28% and 0.48%, respectively.
Stocks posted heavy losses during regular trading as rising bond yields frightened investors. The S&P 500 fell 1.3% while the Dow Jones Industrial Average closed 119 points, or 0.38%, lower. The Nasdaq Composite was the relative underperformer, falling 2.7% as tech names fell. The index is on track to post its third consecutive negative week – the longest weekly streak since September.
The weakness came when the Treasury’s 10-year rate of return extended profits. The key rate rose to a high of 1.49% on Wednesday before pulling back slightly. Last week the yield rose to a high of 1.6% in what some referred to as the “flash” spike.
“Our current strategy work suggests robust economic growth this year with a modest spike in inflation,” said Scott Wren, senior global equity strategist at the Wells Fargo Investment Institute. “In trying to read the tea leaves, we believe the steepness of the yield curve reflects the market’s belief that as the pandemic eases, growth and inflation should continue to return to reasonable levels. We see this as positive for stocks and other risk-weighted assets like raw materials, “he added.
During Wednesday’s session, companies tied to reopening the economy were a ray of hope. Airlines and cruise line stocks rose after President Joe Biden announced Tuesday that the US would have enough Covid-19 vaccines for all adults by the end of May.
Additional stimulus measures could also bring optimism to the market. The Senate is currently debating the $ 1.9 trillion aid package that Parliament passed on Saturday.
“Our macro team sees the economy as spring-loaded in the face of vaccinations and additional stimulus,” wrote Keith Lerner, Truist’s chief market strategist, in a message to customers. “The consumer’s ability and desire to spend on services and experiences should result in the best economic growth we’ve seen in over 35 years.”
On Thursday, investors will take another look at the ongoing economic recovery when data on unemployment claims first comes out for the week ending February 27. Economists polled by Dow Jones forecast 750,000 first-time applicants.
On the profit side, BJs Wholesale and Kroger are among the names reporting ahead of the opening, while Broadcom, Costco and Gap are on deck to provide quarterly updates after the closing bell.
Subscribe to CNBC PRO for exclusive insights and analysis, as well as live business day programs from around the world.