U.S. stock futures were lower in early Tuesday trading as tech stocks continued to fall sharply in the face of higher interest rates and a rotation into stocks more linked to the economic comeback.
S&P 500 futures lost 0.5%, giving up gains earlier in the overnight session. Futures on the Nasdaq-100, home of Big Tech, lost 1.5%. Dow Jones Industrial Average futures shed 20 points.
The move in futures comes after a Monday session marked by stark differences in the sectors of the market. The tech-heavy Nasdaq Composite slid 2.5%, while the Dow rose a modest 27 points. Travel stocks, including airlines and cruise lines, rose sharply across the board, but Apple and Tesla declined.
The broader market finished lower Monday, as the S&P 500 slipped 0.7% for its fifth-straight negative session. The decline came as U.S. Treasury yields rose once again, reflecting a fall in the price of bonds. The 10-year Treasury yield was trading above 1.36% on Monday after starting the year below the 1% mark.
Tesla was down another 6% in premarket trading Tuesday following a 9% decline on Monday. Apple lost 2% in early trading following a 3% slide on Monday.
“The higher Treasury yields move up, the quicker investors are rotating out of high-flying tech stocks and into stocks in the Russell 2000 Index and Dow Jones Industrial Average,” OANDA senior market analyst Edward Moya said in a note.
The bond market will likely remain a key topic of discussion on Tuesday, as Fed Chair Jerome Powell begins his two days of Congressional hearings. The central banker has been adamant that the Fed is not considering raising its benchmark interest rate, but Powell’s comments will be watched closely for possible insight into the economy’s inflation outlook.
Inflation fears have risen in recent weeks as policymakers debate another round of economic relief as Covid cases decline amid the rollout of vaccines. The U.S. surpassed 500,000 deaths from the virus on Monday, according to Johns Hopkins University.
The 10-year Treasury yield rose on Tuesday to around 1.37%. So far this month, the benchmark rate has moved up 28 basis points. The 30-year yield touched a one-year high of 2.2% Monday. A basis point is 0.01%.
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