US futures contract indicates profit for technology

Investors continued to focus their attention on the bond markets after a fall in the price of US government debt last week. Ten-year treasury bonds got a good mark on Monday, yields rose to 1.682%, from 1.729% on Friday. The yield decreases when the price of bonds rises.

Yields climbed for seven consecutive weeks, with parts of the stock market benefiting from several years of low interest rates. Technological stocks in particular have suffered from rising government long-term borrowing costs. Future earnings are worth less as bond yields rise.

Technical stocks, including Apple, ran ahead of the clock, as did electric vehicle maker Tesla, another beneficiary of a depressing return.

The Kansas City Southern Railroad rose 17% in pre-trade after agreeing to be bought by Canadian Pacific Railway in a deal worth about $ 25 billion.

The technically-dominated Nasdaq-100 slipped into five after its fourth loss week on Friday. Many investors expect bond yields to continue to rise as the economy picks up rapidly, which is a challenge for technology stocks that have driven the broader market higher in 2020.

“There are more ups and downs for US bond yields than there is a downside,” said Edward Smith, head of asset allocation research at UK investment firm Rathbone Investment Management. Stocks “that made extraordinary returns last year are probably not going so well now,” he said. Smith added.

This does not mean that investors should abandon technical shares, according to Mr. Smith. Shares of giants such as Apple, Microsoft and Facebook remained resilient on some days as treasury yields soared, he said. Smith, however, added that money managers need to be wary of corners of the market with increased valuations, such as shares in electric vehicle businesses.

The Federal Reserve has so far indicated that it is not concerned about the increase in bond yields. Chairman Jerome Powell is expected to speak at a discussion on the central bank’s innovation presented by the Bank for International Settlements. It starts at 09:00 ET.

Data on the sale of existing homes is available at 10:00 and gives investors a fresh look at the booming housing market. Economists expect sales to decline in February, hampered by rising prices and weak weather in parts of the country.

In currencies, Turkey’s lira fell 9% and traded at $ 7.96 per dollar after replacing the country’s leading central banker late last week. According to Jane Foley, head of the currency strategy at Rabobank, the slide could increase investors’ nervousness about assets in emerging markets.

Combined with the concern about US government bond yields, the slump in Turkey’s currency means that there is ‘enough room for bad trading conditions’ in the broader financial markets. Foley said.

In overseas markets, the Stoxx Europe 600 was virtually unchanged. Shares in AstraZeneca rose 1.5% after the British drugmaker said the Covid-19 vaccine was safe and 79% effective in preventing symptomatic diseases in US clinical trials.

Shares of airlines, including British Airways’ International Consolidated Airlines group, fell after British officials and scientists questioned the likelihood of international travel this summer. Several countries in mainland Europe are struggling with stopping vaccination programs and a jump in coronavirus cases.

Asian markets were mixed by the end of trading. The Chinese Shanghai Composite Index rose 1.1%, while the Hong Kong Hang Seng Index fell 0.4%. The Japanese Nikkei 225 fell 2.1%, leading lower by carmakers after a fire in a factory owned by semiconductor manufacturer Renesas Electronics.

Write to Joe Wallace by [email protected]