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U.S. equity futures rallied on Tuesday as the recent government bond sell-off came to a halt and tech giant stocks gained ground.
Futures contracts linked to the S&P 500 gained more than 1%, suggesting that the broad benchmark of the market could rise after the New York opening bell. Dow Jones Industrial Average futures edged up 0.4%. The blue-chip index set a new intraday high on Monday.
Futures linked to the Nasdaq-100 rebounded 1.8% on Tuesday, indicating that tech stocks are likely to rebound. The high-tech index and the broader Nasdaq Composite Index both fell into correction territory on Monday, meaning gauges fell more than 10% from recent highs.
Tech stocks have come under pressure in recent weeks as a wave of selling in the bond market has pushed up Treasury yields. This has led investors to question the high valuations of the tech sector after its sharp rise in 2020.
The yield on 10-year Treasuries fell to 1.542% on Tuesday. It had finished the day before at 1.594%, its highest level in more than a year.
Stabilizing bond markets are likely to help tech stocks recoup some of their losses, investors said. Fund managers expect many companies in the industry to continue to benefit from increased online shopping and in-home access to multimedia, entertainment and computer options, even as Covid-19 lockdowns simplify.
“It’s that downward buying mentality,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management. “It’s not like we’ve changed our long-term view of technology. Everyone expects it to work well – it was really, really expensive. ”
U.S. lawmakers are on track to pass the latest version of the $ 1.9 trillion coronavirus stimulus package later this week. This has boosted investor confidence in the outlook for the economy and boosted demand for stocks in companies that could benefit from the economic recovery, such as banks and energy producers.
This rotation sent the Dow – which is weighted more towards cyclical sectors – to mark its second highest close in history on Monday.
Some investors now expect bond markets to calm down as appetite for US government debt picks up following the surge in yields. The 10-year Treasury yield was as low as 0.915% towards the start of the year.
“We think a lot of the bond yield movement has happened,” said Hani Redha, portfolio manager at PineBridge Investments. “At this level of performance, we anticipate the arrival of additional buyers. This tends to stabilize the level of performance. ”
Overseas, the pan-continental Stoxx Europe 600 index rose 0.4%.
In Asia, most major indices were mixed at the close of markets. The Shanghai Composite fell 1.8% and South Korea’s Kospi fell 0.7%. Japan’s Nikkei 225 rose 1%.
The New York Stock Exchange Monday.
Photo:
Lev Radin / Zuma Press
Write to Caitlin Ostroff at [email protected]
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