Yields on US government bonds hit their highest level in three months, and stock futures sagged as investors shied away from interest-sensitive tech stocks.
S&P 500-linked futures fell 0.8%, a day after weakness in tech stocks pushed the broad index down and ended a three-day winning streak. Tech-rich Nasdaq-100 futures fell 1.5% on Tuesday, while Dow Jones industrial average futures edged down 0.4%.
Some investors are recalibrating their portfolios to prepare for the gradual end of the ultra-supportive monetary policies used to watch the economy go through the worst of the coronavirus downturn. Rising yields make bonds more attractive than stocks, especially high-valued tech stocks where investors rely on long-term earnings growth.
“People are realizing, or at least remembering, that central banks are going to have to start raising rates,” said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe. “The patient has become accustomed to receiving all of these drugs, but soon these drugs are going to have to be reduced.”
Expectations of tighter monetary policy and concerns about inflationary pressures pushed bond yields higher. The benchmark 10-year Treasury bond yield rose for a sixth straight day on Tuesday, to 1.531%, from 1.482% on Monday. Bond yields and prices move in opposite directions.
Higher yields attracted investors to the US dollar, which was higher against all other major currencies, from the euro to the Swiss franc. The ICE Dollar Index, which tracks the currency against a basket of other currencies, rose for the third day in a row. It was up 0.3% to 93.66, its highest level since November.
“I find it hard to see how we will come out of this latest Treasury liquidation without a rise in the dollar,” said Kit Juckes, currency strategist at SociÃ©tÃ© GÃ©nÃ©rale.
Rising energy prices are putting additional pressure on economies and heightening concerns about inflationary pressures. Brent crude, the international benchmark for oil, rose 0.7% to $ 79.27 per barrel, its highest level since October 2018.
Natural gas prices hit new highs on Tuesday. In the United States, Henry Hub natural gas prices jumped 8.3% to $ 6.22 per million British thermal units, their highest level since late 2008.
Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen are expected to appear before a Senate panel at 10 a.m. ET to discuss the state of the economic recovery.
In pre-market stock moves, Ford Motor Company rose 3.2% after the automaker said it planned to step up its push towards electric vehicles by spending $ 7 billion on new factories.
The big names in tech were lower before the opening bell. Twitter,
Snap and Square all fell around 2%. Shares of energy companies rose as oil prices rose. Occidental Petroleum Corporation and Devon Energy each added at least 2%.
Overseas, European markets collapsed, while Asian indices were mixed. The pan-continental Stoxx Europe 600 fell 1.5%, dragged down by losses among tech stocks. Chip giant ASML fell nearly 6%. Payment firm Fintech Adyen slipped more than 5%.
In Hong Kong, signs of support from China’s central bank helped boost the market share of Chinese real estate developers. The People’s Bank of China said on Monday evening that it “will maintain the healthy development of the real estate market and protect the legitimate rights and interests of home buyers.”
Country Garden Holdings shares,
China Vanke and China Overseas Land and Investment all jumped between 5% and 6%. Evergrande Group in China,
the struggling real estate giant, which fell behind on a payment to international bond holders, rose more than 4%. The city’s flagship index, Hang Seng, rose 1.2%.
Sunac China Holdings jumped nearly 15%, posting two days of steep decline, after the real estate company played down a leaked plea for help from a local government and said sales were good.
In Japan, the Nikkei 225 index edged down 0.2% while in mainland China, the Shanghai composite index rose 0.5%.
âXie Yu and Frances Yoon contributed to this article.
Write to Will Horner at email@example.com
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