US Stock Futures Point to Earnings for Tech


US equities futures faltered on Monday, signaling a mixed start to the week for the major indices.

S&P 500 futures ranged between gains and losses. The wide range of large-cap US stocks snapped a two-week winning streak to slide less than 1% lower late last week. Contracts for the tech-focused Nasdaq-100 rose 0.8%, suggesting that the tech sector will push higher at the opening bell in New York.

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

Yields have risen for seven consecutive weeks, taking a toll on segments of the equity market that had benefited from several years of low interest rates. Tech stocks, in particular, have seen government borrowing costs jump over the longer term. Future earnings are worth less when bond yields rise.

Tech stocks, including Apple, were ahead of the bell, as did electric vehicle maker Tesla, another beneficiary of low bond yields.

Railroad Kansas City Southern jumped 17% in premarket operations after agreeing to be bought by Canadian Pacific Railway in a transaction valued at about $ 25 billion.

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

“There are more advantages to US bond yields than disadvantages,” said Edward Smith, head of asset allocation research at British investment firm Rathbone Investment Management. Stocks “that performed exceptionally well last year are probably not doing so well right now,” Smith added.

That doesn’t mean investors should abandon tech stocks, according to Smith. Shares of giants like Apple, Microsoft and Facebook have been resilient in days when Treasury yields soared, he said. However, Smith added that money managers should be wary of highly valued corners of the market, such as stocks in electric vehicle companies.

So far, the Federal Reserve has indicated that it is not concerned about rising bond yields. President Jerome Powell is scheduled to speak at a debate on central bank innovation hosted by the Bank for International Settlements, starting at 9 am ET.

Data on existing home sales is due by 10 a.m., giving investors a fresh look at the burgeoning real estate market. Economists expect sales to have slumped in February, hampered by rising prices and bad weather in some parts of the country.

In currencies, Turkey’s lira plunged more than 9% to trade at 7.96 to the dollar after the replacement of the country’s top central banker late last week. The drop may increase investor nervousness around emerging market assets, according to Jane Foley, head of currency strategy at Rabobank.

The New York Stock Exchange on Friday.


Photo:

brendan mcdermid / Reuters

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

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

Shares of airlines, including British Airways owner International Consolidated Airlines Group, fell after UK officials and scientists questioned the likelihood of international travel this summer. Several continental European countries are grappling with halting vaccination programs and increasing coronavirus cases.

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

Write to Joe Wallace at [email protected]

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