Precise Investors

Friday, December 2, 2022
Stocks & Shares

U.S. stock futures signal mixed start for major indexes


Contracts for the technology-focused Nasdaq-100 advanced 0.4%, suggesting the tech sector will edge higher in New York

U.S. stock futures wobbled Monday, signalling a mixed start to the week for major indexes.

Futures tied to the S&P 500 fluctuated between gains and losses. The broad gauge of large-cap U.S. stocks snapped a two-week winning streak to slide less than 1% lower by the end of last week. Contracts for the technology-focused Nasdaq-100 advanced 0.4%, suggesting the tech sector will edge higher at the opening bell in New York.

Investors continued to focus on bond markets following a drop in the price of U.S. government debt last week. Ten-year Treasury notes recovered some ground Monday, sending yields down to 1.673%, from 1.729% Friday.

Yields have jumped for seven weeks in a row, denting segments of the stock market that had benefited from several years of low interest rates. Tech stocks, in particular, have suffered from the climb in longer-term government borrowing costs. Future earnings are worth less when bond yields rise.

The tech-dominated Nasdaq-100 slipped to its fourth week of losses in five on Friday. Many investors expect bond yields to keep rising as the economy picks up speed, posing a challenge to tech stocks that powered the broader market higher in 2020.

There is more upside for U.S. bond yields than there is downside, said Edward Smith, head of asset allocation research at U.K. investment firm Rathbone Investment Management. Stocks that delivered exceptional returns last year are probably not going do so well for now, Mr. Smith added.

That doesn’t mean investors should abandon tech stocks, according to Mr. Smith. Shares of giants such as Apple, Microsoft and Facebook have proved resilient on some days when Treasury yields have shot up, he said. However, Mr. Smith added that money managers should be cautious about corners of the market with elevated valuations, such as shares in electric-vehicle companies.

The Federal Reserve has so far indicated that it isn’t concerned about the rise in bond yields. Chairman Jerome Powell is scheduled to speak at a discussion about central-bank innovation hosted by the Bank for International Settlements.

Data on sales of existing homes are due at 10 a.m., giving investors a fresh view into the booming housing market. Economists expect sales to have dropped in February due to rising prices and poor weather in parts of the country.


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