Finance News

S&P 500 futures fall as 10-year bond yields rise to a 14-month excessive

S&P 500-linked futures contracts fell early Thursday and were put under pressure by technology stocks as a surge in bonds fueled fears of equity valuations and led investors to sell high-flyers.

S&P 500 futures fell 0.8% and Nasdaq 100 futures fell 1.8%. Apple, Alphabet, Microsoft and Facebook lost at least 1% in premarket trading. Tesla slipped more than 2%. Dow Jones Industrial Average futures traded flat.

The movement in futures came when the 10-year government bond yield rose 10 basis points to 1.74%, its highest level since January 2020. The 30-year rate also rose 6 basis points, surpassing the 2 level for the first time since August 2019 .5% Rising bond yields can overly impact growth stocks as they make their future returns less valuable today.

Investors digested a mixed bag of economic data on Thursday. Initial weekly jobless claims for the week ended March 13 totaled 770,000, which is worse than an estimate of 700,000, according to the economist polled by Dow Jones.

The Philadelphia Federal Reserve's production index showed a value of 51.8, which clearly exceeded the Dow Jones consensus of 22.0 and reached the highest level since 1973.

The blue-chip Dow closed above 33,000 for the first time on Wednesday after the Federal Reserve announced it would not hike rates until 2023.

Fed Chairman Jerome Powell reiterated that the central bank would like to see inflation steady above its 2% target and a substantial improvement in the US labor market before considering rate changes or monthly bond purchases.

The key message from Wednesday's Fed meeting is, "The committee expects it will be extremely accommodative in the long run, even if the economic outlook improves," wrote Eric Winograd, senior economist at AB.

"The FOMC shares the market's view that growth and inflation are expected to rebound if activity increases in 2021, but it does not see this surge in activity as permanent," he added.

The Fed improved its economic outlook to reflect expectations for a stronger recovery while suppressing investor concerns that it might abandon its simple monetary policy sooner than expected.

The central bank expects gross domestic product to grow 6.5% in 2021 before cooling off in later years and inflation to rise 2.2% this year as measured by personal consumption expenditure. The central bank's stated goal is to keep inflation at 2% over the long term.

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