U.S. stock futures rallied Tuesday as a recent selloff in government bonds paused and giant technology stocks recovered some ground.
Futures tied to the S&P 500 gained 0.8%, suggesting that the broad market benchmark may climb after the New York opening bell. Dow Jones Industrial Average futures edged 0.5% higher. The blue-chips index notched a new intraday record on Monday.
Futures linked to the Nasdaq-100 rallied 2% Tuesday, indicating that technology shares are likely to rebound. The tech-heavy index and the broader Nasdaq Composite Index both fell into correction territory Monday, meaning that the gauges have declined more than 10% from recent highs.
Technology shares have come under pressure in recent weeks as a wave of selling in the bond market lifted Treasury yields. That led investors to question the high valuations that the technology sector is trading at following its steep climb in 2020.
The yield on the 10-year Treasurys ticked lower to 1.530% on Tuesday. It had ended the previous day at 1.594%, the highest level in over a year.
The stabilization in bond markets is likely to help technology shares recoup some of their losses, investors said. Money managers expect many companies in the sector to continue to benefit from increased online shopping and at-home access to media, entertainment and computing options even as Covid-19 lockdowns ease.
“It is this buy-the-dip mentality,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management. “It’s not like we’ve changed our long-term view on tech. Everyone expects it to do well—it was just really expensive.”
U.S. lawmakers are on track to pass the latest version of the $1.9 trillion coronavirus stimulus package later this week. That has boosted investors’ confidence in the economy’s prospects and bolstered demand for stocks in companies that are likely to benefit from the economic rebound, such as banks and energy producers.
This rotation sent the Dow—which is weighted more heavily toward cyclical sectors—to notch its second highest close in history Monday.
Ahead of the market open, shares in
GameStop
gained more than 10%. The stock is climbing for a second day after the board tapped Chewy co-founder
Ryan Cohen
to lead a committee dedicated to transforming the retailer.
Some investors now expect that bond markets could calm as appetite for U.S. government debt revives following the sharp rise in yields. The 10-year Treasury yield was as low as 0.915% near the start of the year.
“We think a big part of the bond-yield move has played out,” said Hani Redha, a portfolio manager at PineBridge Investments. “At this level of yields, we do expect additional buyers to come in. That tends to stabilize the yield level.”
Overseas, the pan-continental Stoxx Europe 600 ticked up 0.6%.
The oil and gas sector in Europe climbed 1.6% as Brent-crude futures, the international gauge for oil prices, rose 1% to $68.92 a barrel.
In Asia, most major indexes were mixed by the close of trading. The Shanghai Composite dropped 1.8% and South Korea’s Kospi declined 0.7%. Japan’s Nikkei 225 advanced 1%.
The New York Stock Exchange on Monday.
Photo:
Lev Radin/Zuma Press
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com
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