U.S. stock futures point to gains in technology

Investors continued to focus their attention on the bond markets after a fall in the price of US government debt last week. The ten-year Treasury notes recovered some ground on Monday, causing yields to drop to 1.682%, from 1.729% on Friday. Yields fall when bond prices go up.

Yields rose for seven consecutive weeks, hurting segments of the stock market that had benefited from several years of low interest rates. Technology stocks, in particular, suffered from the jump in long-term government borrowing costs. Future earnings are worth less when bond yields increase.

Technology stocks, including Apple, rose ahead of the bell, as did electric vehicle maker Tesla, another beneficiary of the bond’s depressed yields.

Railroad Kansas City Southern jumped 17% in the pre-market after agreeing to be purchased by Canadian Pacific Railway in a transaction valued at about $ 25 billion.

The technology-dominated Nasdaq-100 dropped to its fourth week of losses at five on Friday. Many investors expect bond yields to continue to rise as the economy accelerates, which poses a challenge to the technology stocks that propelled the broader market in 2020.

“There are more advantages to US bond yields than there are disadvantages,” said Edward Smith, head of asset allocation research at UK investment firm Rathbone Investment Management. Stocks “that have delivered exceptional returns in the past year are probably not doing so well for the time being,” added Mr. Smith.

This does not mean that investors should abandon technology stocks, according to Smith. Shares of giants like Apple, Microsoft and Facebook have proved resilient in a few days when Treasury yields skyrocketed, he said. However, Smith added that money managers should be wary of high-profile corners of the market, such as shares in electric vehicle companies.

The Federal Reserve has indicated so far that it is not concerned about increasing bond yields. President Jerome Powell is expected to speak at a discussion on central bank innovation organized by the Bank for International Settlements, starting at 9 am ET.

Data on sales of existing homes are due by 10am, giving investors a new view of the expanding real estate market. Economists expect sales to fall in February, hampered by rising prices and bad weather in some parts of the country.

In currencies, the Turkish lira fell more than 9%, to trade at 7.96 per dollar, after the replacement of the country’s main central bank president at the end of last week. The decline could increase investors’ nervousness about emerging market assets, according to Jane Foley, head of foreign exchange strategy at Rabobank.

Combined with concerns about the trajectory of US government bond yields, the fall in Turkey’s currency means that there is “a lot of room for unstable trading conditions” in the broader financial markets, said Foley.

In foreign markets, the Stoxx Europe 600 was almost unchanged. AstraZeneca’s shares rose 1.5% after the British drugmaker said its Covid-19 vaccine proved to be safe and 79% effective in preventing symptomatic diseases in clinical trials in the United States.

The shares of airlines, including the British Airways owner, International Consolidated Airlines Group, fell after UK officials and scientists raised doubts about the likelihood of international travel this summer. Several countries in continental Europe are struggling to stop vaccination programs and increase coronavirus cases.

Asian markets were mixed at the close of trading. The Shanghai Composite Index of China rose 1.1%, while the Hong Kong Hang Seng Index fell 0.4% below. Japan’s Nikkei 225 fell 2.1%, led by automakers after a fire at a factory by semiconductor maker Renesas Electronics.

Write to Joe Wallace at [email protected]