U.S. stock futures dropped Monday and a selloff in U.S. government bonds extended into its sixth week after progress toward a new fiscal stimulus bill brightened economic prospects and sapped demand for technology stocks.
Futures linked to the S&P 500 slipped 0.6%, suggesting that the broad market may decline after the opening bell. The benchmark ended Friday up 0.8% for the week, following a volatile week in which investors rotated out of big technology stocks. Nasdaq-100 futures fell 1.5% at the start of the new week, pointing to tech stocks extending losses.
In the bond market, the yield on benchmark 10-year US. Treasurys ticked up to 1.592% as investors moved funds out of assets considered to be the safest in the world. Yields rise when bond prices fall. It had ended Friday at 1.551%, its highest since February 2020.
President Biden’s $1.9 trillion Covid-19 relief plan was approved in the Senate over the weekend, and faces a vote in the House as early as Tuesday. The additional fiscal spending is expected to bolster the pace of economic recovery and boost inflation. As the outlook brightens, money managers are moving out of government bonds and technology stocks, and into sectors such as banks and energy that are likely to rebound with the economy.
“Stimulus checks into people’s bank accounts will be a big propeller of growth, given the consumer in the U.S. makes up such a big part of U.S. growth,” said Shaniel Ramjee, a multiasset fund manager at Pictet Asset Management. “The underlying strength of the U.S. economy, growing expectations that the stimulus gets fully passed, plus inflation expectations rising because of oil: these are all likely to continue to push bond yields higher.”
Tech stocks have been retreating in recent weeks as vaccination programs advance and economic data point to the recovery being under way. The Nasdaq Composite Index declined over 2% last week, losing ground for a third consecutive week. That is because investors are betting that the largest media, communications and online-shopping companies will see a slower pace of growth as pandemic lockdowns end.
Traders worked on the floor of the New York Stock Exchange on Friday.
Photo:
Nicole Pereira/Associated Press
Ahead of the market open, giant tech stocks including Apple, Microsoft, Amazon.com, Alphabet and
fell in early trading. Apple, the biggest company on the S&P 500 by market value, has dropped over 8% this year. Shares in Tesla, the electric-vehicle maker that was also a favorite among individual investors last year, fell over 3% premarket. It has lost more than 15% so far in 2021.
“The main market element is what’s happening in the yield market: The U.S. tech side is suffering from the current normalization in the cost of capital,” said Samy Chaar, chief economist at Lombard Odier. “The market is currently acknowledging that we’re in a recovery. Flows are rebalancing to better reflect this cyclical recovery.”
Among other stocks moving in premarket trading,
General Electric
rose 3.2%. The Wall Street Journal reported that the industrial conglomerate was nearing a $30 billion deal to combine its aircraft-leasing business with Ireland’s
AerCap.
Some tech stocks edged down, including Tesla, which slipped 4%, and Square which fell nearly 3%.
Overseas, the pan-continental Stoxx Europe 600 rose 0.6%, led by banking stocks. Europe’s stock market is benefiting from investors rotating into value stocks, analysts said.
Among individual stocks, ABN Amro climbed over 7%,
Banco de Sabadell
rose more than 5% and
Deutsche Bank
gained over 4%.
In Asia, most major benchmarks fell by the close of trading. The Shanghai Composite fell 2.3% and Hong Kong’s Hang Seng Index declined 1.9% as investors grappled with signs that Chinese policy makers will take more action to rein in debt and prevent asset bubbles from forming.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com
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