U.S. stock futures tipped higher, with technology stocks ready to lead the boom as bond markets calmed and the 10-year treasury yield fell from a 14-month high.
S&P 500 futures rose 0.2%, leaving the broad-market index on track for a lower decline this week. The benchmark closed at 1.5% on Thursday. Contracts linked to the Nasdaq-100 rose 0.6%, indicating that technology stocks will offset their losses. The Dow Jones industrial average rose 0.1%, leaving the blue-chip index on track to move for a third consecutive week.
In the bond market, the standard ten-year treasury yield declined to 1.682% after ending Thursday at 1.730%, the highest since January 2020.
The key indices were bleak this week, partly due to the brightening economic outlook, and the concern of bond investors that interest rates will climb faster than otherwise expected. Investors are betting that inflation will rise as growth picks up, and will remain so long enough to force the Federal Reserve to tighten monetary policy. These concerns have led to a sharp sell-off in the government bond market, prompting investors to abandon techniques and other high-growth stocks.
“After some significant sales, investors tend to lick their wounds and wake up and say, ‘Is this a real sale or a temporary start?’ says Gregory Perdon, co-chief investment officer at private bank Arbuthnot Latham.
The gain in stock futures on Friday is an indication that investors think it is just a hit. ‘
Treasury yields have risen over the past three consecutive days as investors sold bonds in anticipation of higher inflation. The increase in Treasury’s supply as the government finances trillions of dollars in Covid-19 aid spending, coupled with uncertainty over whether the Fed will extend temporary regulatory relief for large banks, has also dampened the appetite for bonds.
“Investors believe that there is going to be inflation, which is mostly bad for bonds: you tend to lose money when there is an inflationary environment and you have government bonds,” he said. Perdon said. “Ultimately, investors were trying to take the step forward.”
In pre-trading, FedEx rose 3.5% after the package giant said it had nearly tripled its quarterly profit. Nike fell 2.6% after the sneaker business reported revenue that did not meet analysts’ expectations due to cargo delays caused by the shortage of containers and the congestion of ports.
Overseas, the pan-continental Stoxx Europe 600 decreased by 0.4%. Investors say delays in vaccine deployment in Europe outweigh expectations for growth in the region.
“From a macro point of view, it is difficult to see how Europe will perform better,” said Seema Shah, chief strategist at Principal Global Investors.
Travel companies in Europe declined after France again announced a closure for the area around Paris and several other regions. TUI slipped by 6.3%, Aeroports de Paris fell by 4.5% and Deutsche Lufthansa by 4.4%.
In Asia, most important benchmarks declined with the end of trading. The Shanghai Composite Index fell 1.7% and Hong Kong’s Hang Seng fell 1.4%.
The first high-level talks between the Biden government and Chinese officials continue in Alaska, with both parties criticizing. Investors are nervous about continuing tensions between the two major economies.
“The tone indicates that relations between the United States and China will be just as tense as with the previous US government,” she said. Shah said. “As we have seen over the past number of years, this strained relationship has meant that they will wage a few more battles than otherwise, and it will also affect those around them and within their supply chains.”
The major indices were dull this week.
Photo:
Courtney Crow / Associated Press
Write to Anna Hirtenstein by [email protected]
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8