U.S. stock futures soared on Tuesday, with a recent sale of government bonds disrupted and the giant tech stocks regained some ground.
Futures linked to the S&P 500 gained more than 1%, suggesting that the broad market benchmark may rise after the opening bell in New York. Dow Jones Industrial Average futures were up 0.4%. The blue chip index hit a new intraday record on Monday.
Nasdaq-100 futures rose 1.8% on Tuesday, indicating that technology stocks are expected to rebound. The high-tech index and the broader Nasdaq Composite Index fell in the correction territory on Monday, meaning that the indicators fell more than 10% from recent highs.
Technology stocks have come under pressure in recent weeks, as a wave of sales in the bond market has raised Treasury yields. This has led investors to question the high valuations that the technology sector is negotiating after its strong escalation in 2020.
Yield on 10-year Treasury bonds fell to 1.542% on Tuesday. It had closed the previous day at 1.594%, its highest level in more than a year.
Stabilization in the bond markets is likely to help tech stocks recover some of their losses, investors said. Money managers expect many companies in the industry to continue to benefit from increased online shopping and domestic access to media, entertainment and computing options, even with Covid-19’s ease of blocking.
“It’s that mindset to buy the dive,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management. “It is not as if we have changed our long-term view of technology. Everyone expects it to go well – it was very expensive. ”
US lawmakers are on track to approve the latest version of the $ 1.9 trillion coronavirus stimulus package later this week. This increased investor confidence in the outlook for the economy and spurred demand for shares in companies that are likely to benefit from the economic recovery, such as banks and energy producers.
This rotation made the Dow – which has greater weight in the cyclical sectors – reach its second biggest closing in history on Monday.
Some investors now expect the bond markets to calm down, as the US government’s appetite for debt revives after the sharp rise in yields. The 10-year Treasury yield was as low as 0.915% near the beginning of the year.
“We believe that much of the bond yield movement has been accomplished,” said Hani Redha, portfolio manager at PineBridge Investments. “With this level of income, we expect additional buyers to enter. This tends to stabilize the level of income. ”
Abroad, the pan-continental Stoxx Europe 600 was up 0.4%.
In Asia, most of the main indices were mixed at the close of trading. Shanghai Composite fell 1.8% and South Korea’s Kospi fell 0.7%. Japan’s Nikkei 225 advanced 1%.
The New York Stock Exchange on Monday.
Photograph:
Lev Radin / Zuma Press
Write to Caitlin Ostroff at [email protected]
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