Stock futures fell overnight on Thursday after a tech-driven price on Wall Street amid a surge in bond yields.
The futures on the Dow Jones Industrial Average were down 110 points, while the S&P 500 futures were down 0.4%. The Nasdaq 100 futures were down 0.6%.
All eyes will be on the February job report due to be released on Friday morning. Economists expect 210,000 people to be hired in February, compared with just 49,000 in January, according to Dow Jones.
The futures move followed a sharp sell-off triggered by comments from Federal Reserve Chairman Jerome Powell about rising bond yields. He said the recent attempt caught his attention but gave no indication of how the central bank would rein it. Some investors would have expected the Fed chairman to signal his willingness to adjust the Fed’s asset purchase program.
The economic reopening could “put some upward pressure on prices,” Powell said in a Wall Street Journal webinar Thursday. Even if the economy “sees a temporary spike in inflation … I assume we’ll be patient,” he added.
“The market translation of ‘patient’ is that patient does not mean ‘never’ and that Powell indicates that easy money will come to an end at some point,” said Mike Loewengart, managing director of investment strategy at E-Commerce Financial. “While the phrase isn’t too far removed from the Fed’s previous stance, it is enough to move a nervous market south.”
The yield on 10-year government bonds rose again above 1.5% after Powell’s comments. The key rate had stabilized earlier this week after rising to 1.6% last week on higher inflation expectations.
Tech stocks led the market decline as growth companies tend to be more vulnerable to higher interest rates. The Nasdaq Composite fell 2.1% on Thursday, bringing its losses to 3.6% this week. The tech-heavy benchmark also turned negative for the year, falling into correction territory or 10% from its recent high over the course of the day.
The S&P 500 and Dow both fell more than 1% on Thursday, heading for a lost week. With an increase in oil prices, the energy outperformed the previous session with an increase of 2.5%.
“Interest rates rose again, which opened the door to more technology stocks,” said Ryan Detrick, chief marketing strategist at LPL Financial. “The good side is that the economy continues to improve and the finance and energy leadership is suggesting this is not the time everything will be sold.”
