US equity futures fell as investors waited for further comment from Jerome Powell, a day after the Federal Reserve chairman’s comments calmed volatile markets.
Futures linked to the S&P 500 were down 0.2%. Dow Jones Industrial Average futures were also down 0.2% and Nasdaq-100 heavy tech futures were down 0.5%.
Stock markets have faltered in recent days after a strong start to the year, with high-tech companies leading the declines. Investors said a surge in government bond yields, driven by improving growth prospects and rising inflation expectations, has accelerated a turnover in tech stocks that drove markets higher during the pandemic, and towards the best placed actions to benefit from the end of the blockades.
“This really is a function of the reopening of economies,” said Brian O’Reilly, head of market strategy at Mediolanum Investment Funds. “Bond yields are on the rise due to good vaccination rates in the US and UK and it is causing a simple rotation of everything that did well last year, the stocks that stayed at home, towards those that didn’t, the stocks out of stocks. “
“It’s a good story in a way, in the sense that the market is trying to set the price at which economies are going to reopen,” he added.
The yield on the benchmark 10-year Treasury bond, which moves inversely to its price, has risen to its highest level in a year this week. On Wednesday, it rose to 1,411%, from 1,363% on Tuesday.
Powell on Tuesday reaffirmed his commitment to keeping loose monetary policies unchanged for the foreseeable future, helping to contain large losses among tech companies. Investors expect a second day of testimony on Wednesday before the Senate Banking Committee. Mr. Powell is scheduled to speak at 10 am ET.
While the Fed has kept the same message since the pandemic hit, the strength of the recovery could prompt it to change course sooner than many investors expected, said Paul O’Connor, head of multi-joint management at Janus Henderson Investors. .
“Markets expect it to be a 2022 story, however we are seeing considerable improvements in US GDP. Sometime in the middle of this year, the fine-tuning discussion will take place,” he said.
The last batch of earnings reports will be in focus on Wednesday. Nvidia,
Booking Holdings and L Brands will publish their reports after the markets close.
PRA Health Sciences jumped more than 20% ahead of the opening bell after Dublin-based Icon said it would buy the company in a deal worth roughly $ 12 billion.
Square fell 2.9% on pre-market moves after the payments company reported a lower profit in the fourth quarter on Tuesday night.
Data on new home sales will also be analyzed when released at 10 am ET. The US housing market has 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, such as ether, also gained.
In premarket trading, Tesla was up 4.5%. The company’s share price has fluctuated alongside Bitcoin in recent days after the electric vehicle maker said it had bought $ 1.5 billion of the cryptocurrency.
Abroad, the pancontinental Stoxx Europe 600 Index rose 0.5%.
Companies prepared to benefit from the end of movement restrictions were some of the best performers. Travel agency TUI rose 8.5%, while UK-listed cruise operator Carnival shares rose 7.4%. Dufry,
a duty-free shop operator, gained 7.6% and airline operator IAG was up 4.4%.
Asia-Pacific indices fell. The biggest losses came in Hong Kong, where the city government moved to capitalize on booming markets by raising a tax on stock trading. Hong Kong’s benchmark Hang Seng index fell 3%, with Hong Kong Exchanges and Clearing falling 8.8%, even as the broker revealed record annual revenue and net earnings.
Mainland China’s CSI 300, which includes large companies listed in Shenzhen or Shanghai, fell more than 2.5%, while the heavyweight of the Kweichow Moutai index fell more than 5%. The index is now down in four of the five sessions since the Lunar New Year break. Japan’s Nikkei 225 fell 1.6%.
Andy Maynard, director of equities at China Renaissance Securities, said investors were uncomfortable with expensive valuations after rapid increases in the mainland China and Hong Kong markets, particularly against a backdrop of rising bond yields. In a possible sign of growing caution, he said: “You don’t see institutions buying in the fall.”
—Caitlin Ostroff contributed to this article.
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8