U.S. Equity Futures Indicate Gains For Tech

Investors continued to draw their attention to the bond markets after the price of US government debt fell last week. Ten-year Treasuries rallied on Monday, pushing yields down to 1.686% from 1.729% on Friday. Yields fall when bond prices rise.

Yields have climbed for seven straight weeks, hitting segments of the stock market that had benefited from several years of low interest rates. Tech stocks, in particular, suffered from rising long-term government borrowing costs. Future profits are worth less when bond yields rise.

Tech stocks, including Apple, edged up ahead of the bell. Electric vehicle maker Tesla, another beneficiary of depressed bond yields, whose stock has fallen since early February, rose more than 4%.

Railroad Kansas City Southern jumped 17% in pre-market trade after agreeing to be bought out by Canadian Pacific in a deal valued at around $ 25 billion.

The tech-dominated Nasdaq-100 slipped in their fourth week of five-game losing streak on Friday. Many investors expect bond yields to continue rising as the economy accelerates, posing a challenge for the tech stocks that have propelled the broader market in 2020.

“There are more advantages to US bond yields than disadvantages,” said Edward Smith, head of asset allocation research at UK investment firm Rathbone Investment Management. Stocks “which generated exceptional returns last year are probably not doing as well right now,” Smith added.

That doesn’t mean investors should ditch tech stocks, Smith said. Shares of giants such as Apple, Microsoft and Facebook have proven resilient on certain days when Treasury yields have soared, he said. However, Mr Smith added that fund managers should be cautious in corners of the market with high valuations, such as shares of electric vehicle companies.

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

Data on existing home sales is due at 10 a.m., giving investors a new look at the booming housing market. Economists expect sales to decline in February, hampered by higher prices and bad weather in parts of the country.

In foreign currencies, the Turkish lira fell around 9% to trade at 7.93 per dollar after the country’s main central banker was replaced late last week. According to Jane Foley, head of currency strategy at Rabobank, the shift could add to investor nervousness over emerging market assets.

Combined with concerns about the trajectory of US government bond yields, the fall in the Turkish currency means that there is “a lot of scope for unstable trading conditions” in the broader financial markets, Ms. Foley said.

In foreign markets, the Stoxx Europe 600 has remained virtually unchanged. AstraZeneca shares rose 2% after the UK drugmaker said its Covid-19 vaccine was found to be 79% safe and effective in preventing symptomatic disease in clinical trials in the US .

Shares of airlines, including International Consolidated Airlines Group, owner of British Airways, fell after British officials and scientists questioned the likelihood of international travel this summer. Several countries in continental Europe are grappling with the end of vaccination programs and an increase in coronavirus cases.

Asian markets were mixed with the close of trading. The Shanghai Composite Index in China rose 1.1%, while the Hang Seng Index in Hong Kong fell 0.4%. Japan’s Nikkei 225 fell 2.1%, led down by automakers after a fire at a plant owned by semiconductor maker Renesas Electronics.

Write to Joe Wallace at [email protected]