LightRocket / Getty Images
Global technology stocks plummeted on Monday morning, with rising bond yields prompting investors to question the high prices of some companies, even though the US is close to exceeding $ 1.9 trillion in extra stimuli for the economy.
Elsewhere, an attack on a Saudi Arabian oil facility saw the price of Brent crude oil rise above $ 70 a barrel for the first time in more than a year.
US high-tech Nasdaq 100 futures fell 1.91% on Monday, while S&P 500 futures fell 0.81%.
Futures for Dow Jones fell 0.31%, with its more industry-focused companies positioned to do better with the reopening of economies.
Overnight in Asia, China’s CSI 300 fell 3.47%, while Hong Kong’s Hang Seng technology index fell 6.4%. Japan’s Nikkei 225 fell 0.42%.
In Europe, the Stoxx 600 continental index rose 0.65% in morning trading, but the UK’s FTSE 100 fell 0.12%.
“After a strong recovery on Friday, technology stocks are bringing global stock indexes down today as higher Treasury yields continue to drive the turnover of growth companies for companies of value,” he said. Hussein Sayed, chief market strategist at FXTM.
Bond yields, which move inversely to prices, continued to rise, with investors positioned for a strong economic recovery in 2021. Yield on the 10-year US Treasury key note rose 5.1 basis points to 1.605%, about the highest value in over a year.
Yields are rising because expectations of stronger growth and inflation are driving investors to demand higher bond returns.
But rising yields are bringing stocks down, as they make bonds more attractive. Crucially, this also makes future earnings from flashy technology stocks – which are less tied to the economic cycle – less attractive to investors. The Nasdaq fell 1.87% in the previous week.
Shares fell on Monday, despite the US Senate’s approval of President Joe Biden’s $ 1.9 trillion stimulus package. Now you’re going back to the house.
Richard Hunter, head of market at Interactive Investor, said the stimulus bill and the launch of vaccines “point to the likelihood of a strong growth spurt at the end of the year.”
He added: “This, in turn, leads to the specter of inflation and rising interest rates, although the timing remains uncertain.”
The dollar index rose 0.28% to 92.23. Increasing yields on US bonds make dollar-denominated investments more attractive.
In the oil markets, an attack by the Houthi group on Saudi Arabia’s oil facilities has caused a price hike. Saudi Arabia said the Yemeni group’s attack did not cause significant damage.
Brent crude oil rose above $ 70 for the first time in more than 12 months, before dropping to $ 69.25 on Monday morning. WTI crude rose to $ 66.06 a barrel. Prices rose last week after the OPEC + producer group decided to maintain production limits.
Marshall Gittler, head of investment research at BDSwiss, said: “Production does not seem to have been affected, so I question how long this automatic reaction will last.”
He added: “The market’s concern seems to be more the frequency of attacks than the severity.”