Nasdaq futures and treasury prices slide on stimulus progress
Nasdaq futures suffered another selling jolt on Monday, signaling further falls for once high-flying tech stocks, while bond yields soared after the Senate passed the 1, 1 stimulus bill. Joe Biden’s $ 9 billion.
Futures trading for the top 100 Nasdaq companies indicated that the index plunged 1.6% when Wall Street opens later, adding to an 8% drop for the high-tech index over the three last few weeks.
Big names in tech have slumped in recent sessions, with electric carmaker Tesla losing about a third from its February high and Cathie Wood’s ETF Ark Innovation also sinking into a bear market.
The market volatility came as rising expectations of economic growth and inflation triggered a sharp sell-off of US public debt. The sell-off continued on Monday, with the benchmark 10-year Treasury yield rising 0.05 percentage points to exceed 1.60% – close to its highest level in a year after the start of 2021, near 0 , 9%.
Higher borrowing costs are generally seen as bearish for the expensive parts of the stock market because they reduce the value of future cash flows. This has had a particularly marked effect on the biggest winners since the bottom of last March, as many are now trading at high levels relative to their earnings and income expectations.
Monday’s bond market decline comes after the Senate over the weekend passed the President’s massive stimulus package, which includes payments of $ 1,400 to many Americans. The measures adopted by the upper house accounted for just over 8 percent of US economic output, according to Goldman Sachs.
“If he makes it through the House relatively unscathed, then you could see another round of US growth stimuli and possibly more concerns about yields and inflation,” said Jim Reid, research strategist at the Deutsche Bank. “The battle royale will continue.”
In Europe, the regional Stoxx 600 index rose 0.9%, the German Xetra Dax by 1.3%, while the UK’s FTSE 100 index rose 0.1%. But in China, stocks fell, pushing the CSI 300 into “correction” territory after the Shanghai and Shenzhen stock index closed 3.5%. Hong Kong’s Hang Seng sank 1.9 percent.
The European Central Bank will hold its regular monetary policy meeting this week, where it will discuss whether “the recent rise in bond yields is proportional to an improving global economic outlook or an unfavorable tightening in financial conditions,” Reid said.
The 10-year German Bund yield edged up 0.02 percentage point to minus 0.29%, while the equivalent UK gilt yield remained stable at 0.76%.
Data to be released later Monday on the central bank’s bond buying program will give traders some idea of what action the ECB could take to tame the eurozone interest rate hike.
Marco Valli, head of macro research at UniCredit, said showing at least a slight increase in bond purchases would be a significant “credibility problem” since several senior policymakers had indicated in recent days that the central bank should push back a steep rate hike on the block.
Elsewhere, commodity prices continued to rise after a major Saudi oil site attack during the weekend.
The US marker West Texas Intermediate rose 1.63 percent to $ 67.17 a barrel, but then leveled off at $ 65.83. The international benchmark Brent traded above $ 70 for the first time since the market turmoil following the start of the pandemic, but reduced its gains to $ 69.20.