Bond Yields Hit Two-Year High as Stock Futures Fall

US stock futures fell, led by large technology stocks, as government bond yields rose to a two-year high, a sign that investors are rotating out of stocks that do well in a low-interest-rate environment.

Futures for the S&P 500 fell 1% Tuesday, after US markets were shut Monday for a public holiday. Contracts for the tech-focused Nasdaq-100 declined 1.6% and futures for the Dow Jones Industrial Average fell 0.7%.

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All times EST


Technology stocks have come under pressure in January as government-bond yields have risen. On Tuesday, the yield on the benchmark 1[ads1]0-year Treasury note ticked up to 1.822% —its highest level in two years — from 1.771% Friday. Yields rise when prices fall.

In premarket trading, shares of electric-vehicle maker Tesla fell 2.5%. Twitter,

Meta Platforms — formerly known as Facebook — and each fell about 2%.

Investors expect a tight labor market and elevated inflation will prompt the Federal Reserve to carry out multiple rate increases this year. The yield on the two-year government bond rose to 1,034% —the highest level since February 2020 — from 0.965% Friday, a sign of expectations for higher rates. Higher yields can reduce the appeal of future earnings promised by many tech stocks.

Investors in interest-rate futures markets are betting on four to five interest rate increases this year, according to CME Group.

“Markets are still trying to find a level for rate increases. It was only in October the market was expecting one rate hike for 2022 and now it’s expecting four, ”said Edward Park, chief investment officer at UK investment firm Brooks Macdonald. “That’s reflecting the level of uncertainty we have in the market right now about the path of Fed policy.”

The Cboe Volatility Index — Wall Street’s so-called fear gauge, also known as the VIX — ticked up to 21.78, its highest level in a month.

Investors expect the Federal Reserve to carry out multiple rate increases this year.


timothy a. clary / Agence France-Presse / Getty Images

Many financial companies are slated to post earnings ahead of the open market, most notably Goldman Sachs, plus Bank of New York Mellon, PNC Financial Services and Charles Schwab. Profits have begun to ebb at some big banks that benefited from the tumultuous pandemic economy.

Oil prices rose as geopolitical tensions in the Middle East added to worries about tight supply. Futures for West Texas Intermediate, the main grade of US crude, rose 1.9% to $ 85.39 a barrel. If the contracts settle above $ 84.65 a barrel, it will mark their highest closing level since October 2014. Yemen’s Iran-backed Houthi rebels said they were behind aerial attacks in the United Arab Emirates on Monday, as intensifying fighting spills out across the region.

Overseas, the pan-continental Stoxx Europe 600 fell 1.1%, with the biggest losses in the technology and travel and leisure sectors. Shares of GAM Holding fell 8% after the Swiss asset-management firm said it would notch a net loss for 2021 equivalent to around $ 33 million.

Major indices in Asia broadly closed lower, although China’s Shanghai Composite bucked the trend, adding 0.8%. South Korea’s Kospi fell 0.9%, Japan’s Nikkei 225 edged down 0.3% and Hong Kong’s Hang Seng declined 0.4%.

The US dollar last year saw its largest increase in value since 2015. That is good for many American consumers, but it could also put a dent in stocks and the US economy. WSJ’s Dion Rabouin explains. Photo illustration: Sebastian Vega / WSJ

Write to Caitlin Ostroff at

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