Stock Futures Edge Down Ahead of Powell's Comments
By Joe Wallace
U.S. stock futures edged lower Tuesday as investors awaited
Federal Reserve Chairman Jerome Powell's testimony in Congress on
the health of the economy.
Futures tied to the S&P 500 ticked down 0.1%. The benchmark
stocks gauge on Monday fell for a fifth consecutive day, its
longest losing streak since last February. Contracts for the
Nasdaq-100 retreated 0.6%, suggesting technology stocks will
continue to lead the market lower.
A sharp rise in yields on U.S. government bonds in recent days
has sapped investors' appetite for riskier assets, including
stocks. Shares in technology companies, which have powered the
broader market higher for much of the past year, are seen as
particularly vulnerable. That is because many tech companies'
valuations are tied to their future earnings potential. Those
profits are less valuable in today's terms when investors apply a
higher discount rate.
The rise in bond yields "naturally does cause investors and
cause markets to re-examine the view on equities," said Paul
Jackson, global head of asset allocation research at Invesco.
Investing in government bonds is beginning to look more attractive
for the first time in months, he said.
But "the level at which bond yields become truly problematic for
equities is a long way from where we are now," Mr. Jackson
The yield on 10-year Treasury notes ticked up to 1.376%, from
1.370% Monday. Yields rise as bond prices fall.
The move has sharpened focus on Chairman Powell's semiannual
report on the economy and monetary policy to Congress. The first of
two days of testimony starts with Mr. Powell's appearance before a
Senate Committee at 10 a.m. ET.
Mr. Powell is again likely to signal that easy-money policies
will remain in place for the foreseeable future. He will probably
face questions on the size of the next fiscal stimulus package,
interest rates and bond purchases, and the potential for inflation
to heat up alongside accelerating economic growth.
European Central Bank President Christine Lagarde on Monday said
the ECB was closely monitoring bond yields, comments interpreted by
analysts as a sign of discomfort with their recent rise. Mr. Powell
is unlikely to follow suit by pushing back on the rise in Treasury
yields, according to Remi Olu-Pitan, multiasset fund manager at
"At the moment none of those indicators are flashing red -- they
are not even amber yet -- but they are not as they were six months
ago," she said, referring to the level of yields and expectations
of when the Fed is likely to raise interest rates.
Another batch of earnings from major companies are also on tap.
Home Depot and Macy's are due to report ahead of the opening bell
in New York, followed by payments firm Square and security-software
company McAfee after markets close.
The price of bitcoin slid 15% to $47,111.69, according to
CoinDesk. The latest bout of volatility in cryptocurrency markets
followed comments by Tesla Chief Executive Elon Musk, who said over
the weekend that prices for bitcoin and ethereum seemed high.
Tesla shares slid over 4% in premarket trading, after dropping
almost 9% on Monday. The electric-vehicle maker earlier this month
disclosed that it had bought $1.5 billion in bitcoin. Mr. Musk has
also become a prominent cheerleader for cryptocurrencies.
Overseas, the Stoxx Europe 600 shed 0.8% on a busy day for
earnings in the region.
InterContinental Hotels Group rose over 3% after the owner of
Holiday Inn said it would consider future dividends once the
visibility on the pace and scale of the market's recovery
In Asia, Hong Kong's Hang Seng climbed 1% and China's Shanghai
Composite Index slipped 0.2% by the close of trading.
Write to Joe Wallace at Joe.Wallace@wsj.com
(END) Dow Jones Newswires
February 23, 2021 05:08 ET (10:08 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.