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Equity futures fall as bond yields rise




US stock futures fell, led by losses in technology stocks, as investors rejected both government bonds and equities due to concerns that further rate hikes and China’s Covid-19 policy would weigh on growth.

Futures for the S&P 500 fell 1.7%, setting up large indices for another day of losses after the opening in New York. Contracts related to the technology-focused Nasdaq-100 fell 2.2% while contracts for the Dow Jones Industrial Average fell 1.3%.

Investors have largely withdrawn from both equities and bonds after the Federal Reserve approved a half percentage point increase in its reference rate last week. The movement, part of the central bank’s efforts to curb rising inflation, has made money managers unsure of how much more the Fed can tighten in its quest to control prices.

The financial tightening has contributed to fears of a slowdown in global growth. China̵[ads1]7;s implementation of shutdowns and other measures to curb the spread of Covid-19 and Russia’s war on Ukraine have heightened concerns about supply chain disruptions and reduced spending.

“The US stock market is quite expensive, especially technology stocks, the market does not know how high the Fed must go to control inflation, and we have the feeling of a global downturn,” said Sebastien Galy, a macro strategist at Nordea Asset Management. “There is a lot of negative happening in the market.”

US government bonds sold out again, pushing the return on the benchmark index for 10-year government bonds to 3.155% on Monday from 3.124% on Friday. It set it on course to settle on a new perennial high. The 10-year return had risen 1.6 percentage points since the end of 2021 until Friday, which led some investors to reconsider the valuation of technology and growth stocks. Bond yields rise when prices fall.

The Cboe Volatility Index – Wall Street’s so-called fear meter, also known as VIX – rose to 33.51, heading for its highest end level since March 8.

“Market volatility shows that there is great uncertainty about where people think we are headed,” said Peter Andersen, founder of the Boston-based investment firm Andersen Capital Management.

The prospect of further interest rate hikes to combat inflation has worried some investors that such measures will slow economic growth.

This fear has led some money managers to keep the dollar, seen as a safer investment in times of volatility, due to its status as the world’s reserve currency. The WSJ Dollar Index, which measures the US currency against a basket of 16 others, rose 0.1% on Monday.

On commodities, futures prices of Brent oil fell 2.1% to $ 110.01 a barrel. High oil prices since the start of Russia’s war against Ukraine have begun to decline as traders worry that shutdowns to limit the spread of Covid-19 in China will suppress global demand.

The price of bitcoin fell over the weekend and traded at $ 33,010.70 on Monday, down 8.5% from Friday’s 17.00 ET level. The popular cryptocurrency has lost more than a quarter of its value in the period so far this year.

Shares of cryptocurrency companies fell in pre-market trading on Monday along with bitcoin. The crypto exchange Coinbase Global shares fell 6.6%, while the bitcoin mining company Marathon Digital Holdings shares fell 7%.

Shares in Tyson Foods rose 3.4% before the market after reporting quarterly profits and earnings that beat analysts’ expectations.

Abroad, the pan-continental Stoxx Europe 600 fell by 2%, led by a decline in the basic resource and travel and leisure sectors.

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

A woman passed an electronic screen in Tokyo on Monday.


Photo:

Eugene Hoshiko / Associated Press

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

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Serena Ng at Serena.Ng@wsj.com

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