US equity futures fell Tuesday as investors waited for Federal Reserve Chairman Jerome Powell’s testimony in Congress on the health of the economy.
Futures linked to the S&P 500 were down 0.1%. The benchmark equity gauge fell for the fifth day in a row on Monday, its longest losing streak since last February. Contracts for the Nasdaq-100 fell 0.6%, suggesting that technology stocks will continue to lead the market lower.
A sharp rise in US government bond yields in recent days has sapped investors’ appetite for riskier assets, including stocks. Shares of tech companies, which have driven the broader market higher for much of the past year, are seen as particularly vulnerable. That’s because the valuations of many tech companies are tied to their future earnings potential. Those earnings are less valuable in today’s terms when investors apply a higher discount rate.
Rising bond yields “naturally cause investors and markets to reexamine sentiment on stocks,” said Paul Jackson, Invesco’s global director of asset allocation research. Investing in government bonds is starting to look more attractive for the first time in months, he said.
But “the level at which bond yields get really troublesome for stocks is a long way from where we are right now,” Jackson added.