Tick ​​Lower Ahead of Fresh Powell Testimony Futures Shares

The stock markets have faltered in recent days, after a strong start to the year, with high-tech companies leading declines. Investors said an increase in government bond yields, driven by improved growth prospects and rising inflation expectations, accelerated the rotation of technology stocks, which prompted markets to rise during the pandemic, for better stocks. placed to benefit from the end of the blocks.

“This is really a function of the reopening of economies,” said Brian O’Reilly, head of market strategy at Mediolanum Investment Funds. “Bond yields are increasing because of good vaccination rates in the United States and the United Kingdom and this is leading to a simple rotation of everything that went well last year, the stocks that stayed at home, for those who didn’t did, the go-out actions. “

“It is a good story in some ways, as the market is trying to price that economies are going to reopen,” he added.

The yield on the 10-year reference Treasury note, which moves inversely at its price, rose to its highest level in a year this week. On Wednesday, it rose to 1.411%, from 1.363% on Tuesday.

Powell reaffirmed on Tuesday his commitment to keeping easy monetary policies unchanged for the foreseeable future, which helped to contain huge losses among technology companies. Investors are awaiting a second day of testimony on Wednesday to the Senate Banking Committee. Mr. Powell is set to speak at 10am ET.

Although the Fed has followed the same message since the pandemic’s arrival, the strength of the recovery may prompt it to change course earlier than many investors expected, said Paul O’Connor, head of multiple cluster management at Janus Henderson Investors .

“The markets expect it to be a 2022 story, however, we are seeing considerable improvements in the US GDP. Somewhere in the middle of this year, the discussion about the gradual reduction will have to take place, ”he said.

The latest batch of earnings reports will be in focus on Wednesday. Nvidia,

Booking Holdings and L Brands will release their reports after the markets close.

PRA Health Sciences jumped more than 20% before the opening bell, after Dublin-based Icon said it would buy the company in a deal worth approximately $ 12 billion.

Square fell 2.9% in pre-market movements after the payments company reported a lower profit in the fourth quarter on Tuesday.

Data on new home sales will also be analyzed when they are released at 10am ET. The US housing market performed well during the pandemic, due in part to strong demand and low mortgage rates.

Bitcoin rose 3.9% to $ 49,889.73 on Wednesday, after falling 13% on Tuesday. Other cryptocurrencies that fell on Tuesday, like ether, also rose.

In the pre-market, Tesla rose 4.5%. The company’s stock price has fluctuated along with bitcoin in the past few days after the electric vehicle maker said it bought $ 1.5 billion in cryptocurrency.

Abroad, the Stoxx Europe 600 pan-continental index rose 0.5%.

The companies prepared to benefit from the end of movement restrictions were some of the best performers. Travel agency TUI rose 8.5%, while the UK listed shares of cruise operator Carnival rose 7.4%. Dufry,

a duty-free store operator gained 7.6% and the airline operator IAG grew 4.4%.

Asia-Pacific indices fell. The biggest losses were in Hong Kong, where the city government acted to capitalize on expanding markets by raising the tax on stock trading. Hong Kong’s Hang Seng benchmark index fell 3%, with Hong Kong Exchanges and Clearing falling 8.8%, even as the foreign exchange operator reported record annual revenue and net income.

Mainland China ‘s CSI 300, which includes large companies listed in Shenzhen or Shanghai, fell more than 2.5%, with the Kweichow Moutai index falling more than 5%. The index has dropped in four of the five sessions since the Lunar New Year holiday. Japan’s Nikkei 225 fell 1.6%.

Andy Maynard, head of shares at China Renaissance Securities, said that investors are becoming concerned about the high valuations following the rapid rises in the mainland China and Hong Kong markets, especially in a scenario of rising bond yields. In a potential sign of increasing caution, he noted, “You don’t see institutions buying in the fall.”

—Caitlin Ostroff contributed to this article.

Write to Will Horner at [email protected] and Xie Yu at [email protected]