Dow Futures Fall 150 Points After Nasdaq Suffers Worst Loss Since October

Futures related to major U.S. stock indexes fell during Thursday night’s overnight session, after a drop in interest rates earlier in the day helped push the Nasdaq Composite to its worst session since October .

Dow futures fell 150 points, or 0.5%, while Nasdaq 100 futures fell 0.9%. Futures contracts on S&P 500 lost 0.5%.

The extended trading moves came after a regular negative trading session on Thursday.

The Dow Jones Industrial Average fell 559 points, or 1.8%, from a record low. The S&P 500 fell 2.5% to win its worst day since January 27, while the high-tech Nasdaq Composite fell 3.5% and suffered its biggest sell-off in one day since October 28.

The momentum that took stocks to all-time highs at the start of the month met resistance amid a sudden and steep rise in bond yields. The 10-year U.S. Treasury note rate briefly climbed to 1.6% on Thursday before dropping back to around 1.52%, its highest level since February 2020.

The 10-year yield is up more than 50 basis points since the start of the year, with a rapid rise in a bond rate serving as the benchmark for mortgage rates and auto loans.

Economists and investment managers believe that the rate hike is an appropriate bond market response to a positive economy as vaccines are rolled out and GDP forecasts improve, which should benefit corporate earnings.

But the sheer pace of the rise has also had the effect of dampening investor appetite for high-value sectors of the market. Thursday’s 10-year yield jump also put it above the S&P 500 dividend yield, meaning stocks – which are seen as riskier assets – lost that fixed payout premium to to obligations.

“Until recently, market participants have been able to digest the upward drift in long-term rates, but it looks like the next step in interest rates is a bigger bite,” Charlie Ripley, senior strategist in investment at Allianz Investment Management, said in an e-mail.

“Looking at where real returns were, they were just too low compared to growth expectations, and it’s likely that long-term real returns will continue to drift as economic data improves,” he said. he adds.

Popular stocks of big techs like Alphabet, Facebook and Tesla, all of which started the year on a solid footing, fell 3.2%, 3.6% and 8% on Thursday. Apple, one of the world’s largest cash-intensive companies, saw its shares drop more than 15% last month.

Instead of technology, where companies tend to borrow more on average, investors are moving money into so-called reopening trades, buying shares of companies that would benefit the most from the vaccine rollout and a comeback. the usual trends in travel and restaurants.

Energy gained 6.8% this week alone, the biggest winner by far, as consumers around the world are expected to drive and fly as they were before the Covid-19 pandemic soon. Industry and finance are the only two other sectors in Green Week so far.

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