Stable Stock Futures After Tech-Led Mass Sell

Stock futures opened flat at slightly higher Tuesday night after a sell-off during the usual trading day. Concerns over rising Treasury yields and clashes between Washington lawmakers over the debt ceiling and government funding weighed heavily on stocks.

Nasdaq contracts increased. The index closed Tuesday’s regular session down 2.8%, posting its biggest drop since March. The S&P 500 and the Dow Jones also fell sharply.

The decline in tech stocks came as Treasury yields quickly hit multi-month highs, as rapidly rising costs of borrowing put pressure on the valuations of growth and tech stocks. The yield on the benchmark 10-year bond climbed to 1.56%, its highest level since June. The 10-year yield has also risen sharply over a relatively short period of time, gaining more than 16 basis points from its low last Friday to its high on Tuesday.

Amid the movements, Amazon (AMZN) stocks fell 2.6% on Tuesday afternoon for a consecutive session of declines, and other mega-cap tech stocks slipped as well.

“A lot of Big Tech is overpriced,” said Teddy Parrish, CEO and CIO of Parrish Capital. Yahoo Finance Tuesday. “These valuations are going to have to come down a bit in a couple of ways: either they sell or earnings continue to rise and stocks are trading sideways. You can have a bit of both, but to look at some of these big tech companies that aren’t growing as fast as their P / E [price-to-earnings] multiples might involve, I think a lot of them are ahead of themselves. ”

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Some strategists have suggested that Tuesday’s latest drop may not trigger a deeper drop or a formal correction in the very near term. Cyclical sectors, notably energy and industrials, outperformed Tuesday, supported by rising commodity prices, as heightened inflation expectations pushed up prices on everything from crude oil to cotton so far this week.

“I don’t think this is necessarily the start of a correction, but we have certainly seen rotational corrections throughout this year,” Art Hogan, chief market strategist at the National Securities Corporation, Tuesday’s market movements told Yahoo Finance. “It looks a lot more like a realignment. So obviously we have some weird machinations in the markets towards the end of the quarter and it’s knocking on the door tomorrow.”

“We certainly have enough worries in general about the future, whether it’s inflation or how sticky it is, the Fed’s cut. [and] what that might mean for profits… and certainly what’s going on in Washington and what they can and can’t accomplish this week, ”he added. “I think you lump it all together with the 10-year return that has increased quite significantly in a short period of time, and I really think it’s about the pace, not the ultimate level.”

In Washington, lawmakers are rushing to pass legislation to fund the government beyond the end of the fiscal year on Thursday. Republican lawmakers have been reluctant to tie a continued resolution to fund the government to a move to raise the debt ceiling until the end of 2022, putting lawmakers at a standstill ahead of Thursday night’s deadline to avoid a shutdown . This is also accompanied by ongoing debates around a $ 1,000 billion bipartite infrastructure agreement and a $ 3.5 trillion budget reconciliation plan, with key actions on each of them also due. take place later this week.

“It’s really important to separate the shutdown, which is terrible, from the debt limit, which is catastrophic,” said Jason Grumet, president of the Bipartisan Policy Center, Yahoo Finance told Yahoo on Tuesday. “There could be, I think, a very short government shutdown Friday night before Saturday, Sunday. And I think you would then see a continued short resolution to get the government back on track.”

“The government shutdown is not really the problem we are grappling with,” he added. “The problem we’re grappling with is really the debt ceiling. The Democrats have tried to bring them together. It didn’t sell for the Republicans. Some Democrats take a different approach on the debt ceiling. But I’m not particularly concerned about a government shutting down. ”

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6:15 p.m. ET Tuesday: Stock futures are on the rise

Here are the main movements on the markets as of Tuesday evening:

• S&P 500 Futures Contracts (ES = F): +7.5 points (+ 0.17%), at 4,351.00

• Dow Futures (YM = F): +76 points (+ 0.22%), at 34,251.00

• Nasdaq Futures (NQ = F): +13.5 points (+ 0.09%) to 14,778.25

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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter