Wall Street was set for a downbeat open Tuesday as global investors worried over economic growth and inflation, sending bond yields higher and helping commodity prices hit decade highs.
Dow Jones Industrial Average
indicated an open 130 points lower, after the index rose 71 points Monday to close at 34,869.
Nasdaq
futures also indicated a weak start to Tuesday trading, with futures for the technology-heavy
Nasdaq-100
down 1.3%.
Overseas, Tokyo’s
Nikkei 225
fell 0.2%, in line with other Asian stocks outside of China, where industrial production is under pressure from a power crunch and economic growth prospects are downbeat. Both Goldman Sachs and Nomura downgraded forecasts for Chinese growth in 2021.
The pan-European
Stoxx 600
was 1.4% lower.
Investor attention is focused on inflation concerns, which has sent bond yields surging. The yield on the 10-year U.S. Treasury note was 1.53% early Tuesday, with the 30-year yield pushing past the 2% milestone to 2.06%.
Higher bond yields are putting pressure in particular on technology stocks, with the Nasdaq underperforming other indexes Monday and set for a repeat Tuesday. Elevated yields as well as higher interest rates typically lower the current value of future cash flows, hitting high-growth technology companies that expect significant profits in years to come.
Also read: The Stock Market Has Put China Evergrande Concerns Behind It. Why That’s a Mistake.
Later, U.S. Federal Reserve Chair Jerome Powell will address lawmakers, along with Treasury Secretary Janet Yellen. Prereleased comments showed Powell will warn the Fed may have to raise rates if inflation becomes more persistent than anticipated.
“U.S. 20-year and 30-year paper is yielding the most since July, both above 2%, whilst the benchmark 10-year note has jumped above the psychologically important 1.5% level to 1.53%, its highest since June,” said Neil Wilson, an analyst at broker Markets.com.
“Bets on central banks tightening monetary policy more swiftly than previously thought are fueling the selling in rates as investors also focus in on the wrangling in Washington over the U.S. debt ceiling,” Wilson added.
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Commodity markets continued their tear, with the Dow Jones Commodity Index—which is a broad measure of the commodity futures market—up 1.3% to the highest levels seen in the last 10 years.</…….
