U.S. stock futures soared, with tech stocks positioned to lead the recovery, as the bond markets calmed and the 10-year Treasury yield fell from a 14-month high.
S&P 500 futures were up 0.2%, leaving the broad market index on the way to a tepid decline this week. The indicator closed down 1.5% on Thursday. Contracts linked to the Nasdaq-100 rose 0.6%, suggesting that technology stocks would reduce their losses. Dow Jones Industrial Average futures rose 0.1%, leaving the blue-chip index on track to move forward for the third consecutive week.
In the bond market, the 10-year reference Treasury yield fell to 1.682%, after ending Thursday at 1.730%, the highest since January 2020.
The main indices have been unstable this week, affected by optimistic economic prospects, on the one hand, and concern by bond investors that interest rates will rise earlier than expected, on the other. Investors are betting that inflation will increase as growth accelerates and will remain high long enough to force the Federal Reserve to tighten monetary policy. These concerns led to a sharp drop in the government bond market on Thursday, and spurred investors to abandon technology stocks and other high-growth stocks.
“After a bit of a significant sale, investors tend to lick their wounds and wake up and say, is this a real sale or is it a temporary problem down the road?” said Gregory Perdon, co-director of investments at private bank Arbuthnot Latham.
The gains in stock futures on Friday are “indicative that investors think it is just an obstacle in the way”.
Treasury yields have increased for the past three consecutive days, with investors selling bonds in anticipation of higher inflation. A jump in the supply of Treasury bills as the government finances trillions of dollars in relief spending from Covid-19, combined with uncertainty over whether the Fed will extend temporary regulatory relief to large banks, has also dampened the appetite for bonds.
“Investors think there will be some inflation, which tends to be bad for bonds: you tend to lose money if there is an inflationary environment and if you have government bonds,” said Perdon. “So, ultimately, investors have been trying to anticipate this move.”
In the pre-market, FedEx rose 3.5% after the package giant said its quarterly profit almost tripled. Nike fell 2.6% after the tennis company reported revenue that fell short of analysts’ expectations due to shipping delays caused by container shortages and port congestion.
Abroad, the pan-continental Stoxx Europe 600 fell 0.4%. Delays in launching the vaccine in Europe are weighing on growth expectations in the region, investors said.
“From a macro perspective, it is difficult to see how Europe will outperform,” said Seema Shah, chief strategist at Principal Global Investors.
Travel companies in Europe declined after France announced another blockade for the area around Paris and several other regions. TUI fell 6.3%, Aeroports de Paris fell 4.5% and Deutsche Lufthansa fell 4.4%.
In Asia, most of the main benchmarks fell at the close of trading. The Shanghai Composite Index fell 1.7% and Hong Kong’s Hang Seng fell 1.4%.
The first high-level negotiations between the Biden government and Chinese officials are underway in Alaska, with both sides exchanging criticism. Investors are nervous about continuing tensions between the two main economies.
“The tone suggests that the US-China relationship will be just as strained as it was with the previous US administration,” said Shah. “As we have seen in recent years, this strained relationship means that they will have more difficulties than before and it also affects those around them and within their supply chains.”
The main indices are unstable this week.
Photograph:
Courtney Crow / Associated Press
Write to Anna Hirtenstein at [email protected]
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