Futures contracts tied to the major U.S. stock indexes traded lower early Friday as the 10-year yield jumped, rekindling fears that rising rates will take the comeback momentum out of equities, especially tech names.
The move comes a day after the S&P 500 closed at a record as President Joe Biden signed landmark stimulus legislation.
S&P 500 futures lost 0.6%. Futures for the tech-heavy Nasdaq-100 shed 1.7%. Dow futures fell 20 points, or 0.1%.
The 10-year Treasury yield jumped back to near its high level for the year. The yield was last at 1.61%, up about 8 basis points overnight. (1 basis point equals 0.01%)
A quick rise in bond yields put pressure on the Nasdaq names earlier in March as investors shifted toward economically sensitive, cyclical stocks. Sharp increases in interest rates can put outsized pressure on high-growth tech stocks as they reduce the relative value of future profits.
That trend appeared to partially reverse on Thursday as bond yields calmed. But on Friday morning, the fear returned.
Shares of Tesla and Twitter declined in premarket trading. Netflix was also lower.
Before Friday’s open, the Nasdaq is up 3.7% on the week and is outperforming both the S&P 500 and the Dow over the period.
U.S. stocks climbed to record highs during Thursday’s regular session as a rebound in tech shares resumed and Biden’s $1.9 trillion Covid-19 relief package became law. The S&P 500 jumped 1% and hit a new closing high, surpassing its previous record from Feb. 16.
“While we expect conditions to remain volatile, the most recent developments on three of the main market drivers—stimulus, pandemic news, and inflation data— point to further equity upside,” wrote Mark Haefele, chief investment officer at UBS Global Wealth Management.
“The stimulus is substantially larger than had been expected earlier in the year. Its provisions are also likely to be highly supportive for consumption and growth,” he added in reference to the stimulus. “This windfall comes on top of existing signs of pent-up demand from US consumers.”
But while the S&P 500 clinched a new closing record, the Nasdaq Composite posted the best gain on the day with a climb of 2.5% amid the pivot back into popular technology equities. Moves that carried that index higher included a 4.7% pop in Tesla and gains of at least 3% in Apple, Facebook, Alphabet and Netflix.
The Nasdaq is clawing its way out of a 10% correction it suffered earlier this month and remains 5.48% below its own record that it set in February.
Signs that the U.S. economy may be set for a healthy 2021 were plentiful on Thursday after Biden signed his much-anticipated $1.9 trillion coronavirus relief package into law. The plan will send direct payments of up to $1,400 to many Americans, and will also put nearly $20 billion into Covid-19 vaccinations and $350 billion into state, local and tribal government relief.
Biden announced Thursday evening that he would direct states to make all adults eligible for the vaccine by May 1 in his first primetime address as president.
Investors also cheered a slightly better-than-expected reading on weekly jobless claims that showed a decline in the number of first-time applicants for jobless benefits.
