Stock futures fall with increasing bond yields

Futures on U.S. stocks fell earlier in the week, suggesting major stock indices could fall again after last week’s big oscillations.

Futures for the S&P 500 fell 1.5%. Contracts related to the technology-focused Nasdaq-100 fell 1.7%, while contracts for the Dow Jones Industrial Average fell 1.2%.

U.S. government bonds sold out again, pushing yields on the reference ten-year government bond to 3.171% on Monday from 3.124% on Friday. That put him on a course to calm down at another fresh perennial peak. Ten-year yields have risen 1.6 percentage points since the end of 2021, prompting some investors to reassess technology and growth stock values. Bond yields rise when prices fall.

“Yields are rising because investors think inflation is out of control,” said Peter Andersen, founder of Boston-based investment firm Andersen Capital Management. “The reality is that we have been living in an environment with extremely low rates for a long time and it is natural for the Fed to raise rates, regardless of inflation figures,” he added.

Last Wednesday, U.S. bonds and stocks strengthened after the Federal Reserve approved an increase in its reference loan rate by half a percent to a target range between 0.75% and 1%. Fed Chairman Jerome Powell said officials are not considering an even bigger increase at the next central bank meeting. Mr Powell also said inflation was too high and that the Fed would move quickly to cut it. He pointed out the price index of personal consumption expenditures, which rose by 6.6% in March.

The day after Mr Powell’s comments, shares fell sharply and the decline continued until Friday, extending a series of losses for the US market in which the S&P 500 and Nasdaq Composite Index have now fallen for five weeks in a row. As of last Friday, the Nasdaq has lost 22% so far, while the S&P 500 has fallen 13% and the Dow 9.5% lower.

“There was no news from day to day that would cause this dramatic change in feelings during the 24-hour period. “Market volatility shows that there is a lot of uncertainty about where people think we are going,” Mr Andersen said.

The possibility of further raising interest rates to curb inflation has worried some investors that such measures will slow economic growth. The changes in policy came at a time when Russia’s war against Ukraine and measures to curb new Covid-19 epidemics in China have clouded prospects.

“We have a slowdown in growth and tighter financial conditions,” said Hani Redha, portfolio manager at PineBridge Investments. “It’s the opposite of what we had 18 months before this year, which was an ideal backdrop for risk markets.”

These fears have led some money managers to hold the dollar, which is considered a safer investment in times of volatility, due to its status as the world’s reserve currency. The WSJ Dollar index, which measures the U.S. currency against a basket of 16 others, rose 0.5% on Monday.

For commodities, futures prices for Brent crude fell 1.1% to $ 111.15 a barrel.

Abroad, the pan-continental Stoxx Europe 600 fell 1.6%.

In Asia, Japan’s Nikkei 225 fell 2.5% on Monday, while Australia’s S & P / ASX 200 fell 1.2%.

The woman walked past an electronic screen in Tokyo on Monday.


Photography:

Eugene Hoshiko / Associated Press

China’s CSI 300 index, which tracks the largest companies listed in Shanghai or Shenzhen, fell 0.8%. Markets in Hong Kong were closed due to a national holiday.

The price of bitcoin fell over the weekend and traded at $ 33,278 on Monday, down 7.5% from Friday’s 5pm Eastern Time. The popular cryptocurrency has lost more than a quarter of its value in the year to date.

Write to Serena Ng at [email protected] and Caitlin Ostroff at [email protected]

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