Bond yields hit two-year high as stock futures fall
U.S. stock futures fell and bond yields hit two-year highs, fueling investor fears that rising interest rates will stymie the big tech stocks that have dominated the market.
S&P 500 futures fell 1% on Tuesday, after US markets are closed on Monday for a holiday. Contracts on the technology-focused Nasdaq-100 fell 1.6% and Dow Jones Industrial Average futures fell 0.7%.
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Tech stocks came under pressure in January as government bond yields rose. On Tuesday, the yield on the benchmark 10-year Treasury note rose to 1.822% – a two-year high – from 1.771% on Friday. Output increases when price falls.
In pre-market trading, shares of electric vehicle maker Tesla fell 2.5%.
—Called Facebook — and
decreased by about 2%.
Investors expect a tight labor market and rising inflation will prompt the Federal Reserve to make more interest rate hikes this year. Yields on two-year government bonds rose to 1.034% – the highest since February 2020 – from 0.965% on Friday, a sign of expectations for higher interest rates. Higher yields could diminish the appeal of future earnings that many tech stocks promise.
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“The markets are still trying to find a rate hike. It was only in October that the market was expecting a rate hike in 2022 and now it is expecting four,” said Edward Park, chief investment officer at British investment firm Brooks Macdonald. “That reflects the level of uncertainty we have in the market right now about the direction of Fed policy.”
The Cboe Volatility Index – what is known as Wall Street’s fear gauge, also known as the VIX – hit 21.78, a one-month high.
Investors expect the Federal Reserve to make more interest rate hikes this year.
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Many financial firms are expected to release earnings before the market open, most notably Goldman Sachs, plus Bank of New York Mellon, Financial Services PNC and Charles Schwab. Profit has begun Discounts at some major banks benefit from the turbulent pandemic economy.
Oil prices rose as geopolitical tensions in the Middle East added to worries about tight supply. West Texas Intermediate crude futures, the main US grade, rose 1.9% to $85.39 a barrel. If the contracts settle above $84.65 a barrel, it would mark the highest close since October 2014. Yemen’s Iran-backed Houthi rebels say they are behind aerial attacks in the United Arab Emirates on Monday, as fighting intensified in the area.
Overseas, the continent-wide Stoxx Europe 600 fell 1.1%, with the biggest losses in the technology and travel and entertainment sectors. Shares of
fell 8% after the Swiss asset manager said it will have a net loss for 2021 equivalent to about $33 million.
Major indexes in Asia generally closed lower, although China’s Shanghai Composite bucked the trend, adding 0.8%. South Korea’s Kospi fell 0.9%, Japan’s Nikkei 225 fell 0.3% and Hong Kong’s Hang Seng fell 0.4%.
The US dollar last year saw its biggest increase in value since 2015. That’s good for many US consumers, but it could also hurt US stocks and the economy. WSJ’s Dion Rabouin explains. Artwork: Sebastian Vega / WSJ
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com
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https://www.wsj.com/articles/global-stock-markets-dow-update-01-18-2022-11642494893?mod=rss_markets_main Bond yields hit two-year high as stock futures fall
