US stock futures fell on Tuesday as investors awaited the testimony of Federal Reserve Chairman Jerome Powell at Congress on the health of the economy.
Futures contracts linked to the S&P 500 fell 0.1%. The benchmark stock indicator fell on Monday for the fifth consecutive day, its longest losing streak since last February. Contracts for the Nasdaq-100 fell 0.6%, suggesting that technology stocks will continue to lead the bear market.
A sharp rise in US government bond yields in recent days has undermined investors’ appetite for riskier assets, including stocks. The shares of technology companies, which boosted the broader market for much of last year, are seen as particularly vulnerable. This is because the ratings of many technology companies are tied to their potential for future earnings. These profits are less valuable under today’s terms, when investors apply a higher discount rate.
The increase in bond yields “naturally causes investors and markets to reexamine the view on stocks,” said Paul Jackson, global head of asset allocation research at Invesco. Investing in government bonds is starting to look more attractive for the first time in months, he said.
But “the level at which bond yields become truly problematic for stocks is a far cry from where we are now,” added Jackson.