US equity futures fell on Thursday despite data showing the economy continuing to slowly recover.
Futures linked to the S&P 500 were down 0.3%. Nasdaq-100 futures fell almost 0.8%, suggesting sharp declines in tech stocks after the opening bell.
Contracts pegged to the Dow Jones Industrial Average ranged between gains and losses, suggesting the top-line index may be muted after closing at an all-time high on Wednesday.
Recent data on Thursday showed weekly jobless claims fell to 730,000 for the week ending February 20, a decrease from the previous week and less than economists expected. The US economy grew in the fourth quarter at an annualized rate of 4.1%. New durable goods increased 3.4% in January for the ninth consecutive month as manufacturing continued to recover.
Investor appetite for risky assets had recovered on Wednesday following comments from Federal Reserve Chairman Jerome Powell that the central bank will keep interest rates low for a while.
Still, the recent sharp rise in bond yields, which closed Wednesday at their highest level in a year, has made some money managers more cautious. Those investors are considering transferring funds to less risky assets such as bonds and to stocks with lower valuations than tech companies.
“The market is nervous. Rising bond yields are putting pressure on stocks, especially growth stocks, ”said Sebastien Galy, a macro strategist at Nordea Asset Management. “There is a small reduction in risk overall,” he added.
Optimism about the economic recovery is prompting investors to move funds into stocks that are likely to benefit from a rally this year. That’s hurting tech stocks, which drove much of last year’s rally.
“The rise in bond yields triggers this turnover, away from growth stocks and more in favor of value stocks,” said Sophie Chardon, cross-asset strategist at Lombard Odier. “Rising yields are supportive for banks, higher oil prices support energy. It is a change of leadership ”.
The yield on the benchmark 10-year Treasury bond rose to 1.460%, from 1.388% on Wednesday. The yield on government bonds has been on the rise as investors cut their holdings of the safest assets.
Investors are also on the lookout for signs of rising inflation following heavy doses of monetary and fiscal stimulus. At the same time, markets have also become cautious as recent economic data showed that the recovery is likely to be slow and stalled.
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Stocks popular with Reddit users on the WallStreetBets forum soared in the last trading hour on Wednesday, in volatility reminiscent of activity seen last month. In premarket trading, GameStop was up 55% and AMC Entertainment was up 11%.
The movements show that “there is still liquidity and a lot of access to speculative bets,” Ms Chardon said. “We have to be prepared to live with this kind of targeted bubble, but I wouldn’t see it as a threat to the global stock market.”
Prior to the market opening, Moderna gained more than 3% after announcing a plan to increase its Covid-19 vaccine manufacturing capacity. Best Buy fell 5.4% after it said it anticipates a slowdown in sales growth in 2021.
Oil prices continued to climb, with Brent crude rising for a fourth day. The international oil gauge added 0.5% to $ 66.51 a barrel, close to its highest level since January 2020.
Abroad, the pancontinental Stoxx Europe 600 fell 0.1%.
Among individual stocks, brewery Anheuser-Busch InBev fell nearly 5% after its fourth-quarter earnings fell short of estimates. British packaging company DS Smith jumped more than 6% following reports that rival Mondi is exploring an acquisition.
Investors have also been selling European government bonds in recent weeks in search of higher yields. The yield on French 10-year bonds, which moves inversely to price, rose above zero for the first time since June and reached 0.024%.
In Asia, most of the major benchmarks ended the day. The Shanghai Composite Index added 0.6% and the Hong Kong Hang Seng Index rose 1.2%. South Korea’s Kospi index rebounded 3.5% after its central bank kept interest rates at record lows.
Write to Anna Hirtenstein at [email protected]
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