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US futures drop as Nasdaq jumps

Nasdaq

The Nasdaq 100 gained 4% overnight, while the S&P 500 contracts and Nasdaq 100 futures dropped

US futures tumbled and Asian stocks were steady Wednesday as traders evaluated a surge in the Nasdaq 100 and the outlook for struggling Chinese equities. The dollar pared a loss and Treasury yields held declines.

China’s CSI 300 gauge gained modestly after a fall on Tuesday that evaded state efforts to slow the pace of losses. The Nasdaq 100 gained 4% overnight on a revival of higher-valuation stocks such as Tesla Inc. The move snapped a rotation into value shares based on optimism about an economic recovery from the pandemic. S&P 500 contracts and Nasdaq 100 futures dropped.

Treasury yields steadied below their recent peaks as the first in a series of US auctions went off without disrupting markets. Upcoming sales of 10- and 30-year government bonds will test appetite for the safest debt after last month’s poorly bid seven-year auction sent tremors across markets.

The pullback in Treasury yields Tuesday encouraged investors to wade back into growth stocks, which suffered recently on worries about valuations. Longer-term borrowing costs are still up considerably this year on the prospect of rapid inflation as economies recover from the pandemic.

In China, a report showing soaring producer prices highlighted the risk of the country exporting inflation as factories charge more for goods sold outside the country. Upcoming consumer prices data in the US are expected to show a slightly faster annual increase.

The rising trend in bond yields is consistent with economic growth expectations, said Lauren Goodwin, portfolio strategist at New York Life Investments. That backdrop still favours cyclicals over defensive assets and supports equities over bonds, and a weaker US dollar, she said.

The Australian dollar dropped after the central bank governor suggested markets may be getting ahead of themselves by pricing in an interest-rate rise within the next couple of years.

Oil extended declines as the dollar firmed, adding more volatility to the market after a mixed industry report on US stockpiles. Bitcoin fell below $54 000 after hitting a two-week high.

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