U.S. stock futures fell on Tuesday, suggesting that markets are taking a break after a spike in volatility in both stocks and bonds.
Futures contracts linked to the S&P 500 fell 0.5%, pointing to a decline in the broad market index, after having shot up on Monday on its best day since June. Futures linked to the Nasdaq-100 fell 0.6%, signaling declines in technology stocks after the opening bell.
Investors say their focus is directly on central bank officials looking for clues as to how monetary policy may change in the future. This will determine your appetite for government bonds and inflation-adjusted returns. A flurry of easy money from the Federal Reserve since last year’s pandemic helped curb bond returns and fueled a rebound in the stock markets for much of last year.
This phenomenon seemed to stop in recent weeks: money managers adjusted their portfolios in anticipation of an economic recovery and a potential increase in inflation, leading to a sale of government bonds. Yields soared last week, with falling bond prices, leading to stock tensions. The bond markets have since stabilized and stocks rose further on Monday.
“We are just taking a breath after yesterday,” said Fahad Kamal, investment director at Kleinwort Hambros.