U.S. stock futures surged Monday, indicating a mixed start to the week for the major indexes.
Futures linked to the S&P 500 fluctuated between gains and losses. Late last week, the US majors broke their two-week profit streak with a 1% loss. Technology-focused contracts on the Nasdaq-100 rose 0.8%, suggesting the technology sector will be higher at the opening of the session in New York.
Investors continued to turn their attention to the bond markets after US government bond prices fell last week. Ten-year Treasuries tightened slightly on Monday, pushing yields up to 1.682% from 1.729% on Friday. Yields fall as bond prices rise.
Earnings have risen for seven weeks in a row, weighing on segments of the stock market that have benefited from years of low interest rates. Technical stocks in particular have suffered over the long term from the rapidly rising cost of government debt. If bond yields rise, future returns will be worth less.
Technology stocks, including Apple, led the way before the bell, as did electric car maker Tesla, which also pushed bond yields lower.
Kansas City Southern Railway made a 17% jump in premarket trading after an agreement to buy shares of the company.
Canadian Pacific Railway
in a deal worth about $25 billion.
On Friday, the Nasdaq-100, which dominates the technology sector, lost for the fourth time in five weeks. Many investors believe that bond yields will continue to rise as the economy improves, threatening the tech stocks that pushed up the overall market in 2020.
US bond yields have more upside than downside potential, says Edward Smith, head of asset allocation analysis at Rathbone Investment Management in the UK. Equities that posted brilliant returns last year are probably not yet well stocked, he added. Smith added.
According to Smith, this does not mean that investors should drop technology stocks. Shares of giants such as Apple, Microsoft and Facebook proved profitable as Treasury bond yields skyrocketed, he said. However, Smith added that fund managers should be wary of corners of the market with high valuations, such as shares in electric cars.
The Federal Reserve has so far indicated that it is not concerned about rising bond yields.
Jerome Powell.
will speak at a discussion on innovation in central banks at the Bank for International Settlements, which begins at 9 a.m. IT.
Data on sales of existing homes is expected at 10:00 a.m., giving investors a new perspective on the booming housing market. Economists expect sales to fall in February due to rising prices and bad weather in some parts of the country.
In currencies, the Turkish lira fell more than 9% to 7.96 per dollar following the change of the country’s top central banker late last week. The decline could make investors more nervous about investing in emerging markets, the European Commission report said.
Jane Foley,
Head of Currency Strategy at Rabobank.
New York Stock Exchange on Friday.
Photo:
Brendan McDermid/Reuters
Combined with concerns about the direction of US Treasury bond yields, the decline in the Turkish currency means there is plenty of room for volatile trading conditions in the broader financial markets, Foley said.
On foreign markets, the Stoxx Europe 600 remained virtually unchanged. Actions
AstraZeneca
rose 1.5% after the UK drugmaker said its Covid-19 vaccine proved 79% safe and effective in preventing symptomatic disease in a US clinical trial.
Shares of airlines, including International Consolidated Airlines Group, part of British Airways, have fallen after British officials and scientists questioned the likelihood of international travel this summer. Several countries in continental Europe are struggling with the end of vaccination programs and a dramatic increase in the number of coronavirus cases.
Asian markets showed a mixed picture in late trading. The Shanghai Composite Index rose 1.1 percent, while Hong Kong’s Hang Seng Index fell 0.4 percent. Japan’s Nikkei 225 fell 2.1 percent, under pressure from automakers following a fire at a semiconductor manufacturer’s factory.
Renaissance Electronics.
Email Joe Wallace at [email protected].
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