US stock index futures were mostly down slightly on Thursday after the Dow Jones Industrial Average closed at a record high.
Dow-related futures contracts rose 20 points. S&P 500 futures lost 0.3%. The Nasdaq 100 futures were down about 0.8% as technology stocks came under renewed pressure. Tesla and Facebook shares fell in premarket trading.
Better than expected economic data added to sentiment. The number of initial jobless claims for the week ending February 20 stood at 730,000, compared to a pressure of 845,000 expected by economists polled by Dow Jones. Durable goods orders rose 3.4% in January, compared to a Dow Jones consensus of 1.0% growth.
The yield on 10-year government bonds reached 1.46% on Thursday morning, its highest level since February 2020. The key interest rate rose by 35 basis points this month. Higher interest rates could encourage investors to switch from stocks to bonds, and they could also hit the growth-oriented technology sector particularly hard.
“Our base case is that with rising growth and inflation expectations and eventually the Federal Reserve normalizing, interest rates will continue to rise,” said Ryan Detrick, chief market strategist at LPL Financial. “We also believe that if rates rise too high too quickly, the Fed will step in to ensure that rising rates don’t become too restrictive and disrupt the stock markets or the real economy.”
Some traders looked beyond the spike in yields after Fed chairman Jerome Powell stressed the central bank’s commitment to loose policy and downplayed inflation risk. It could take three years or more to meet the Fed’s goals.
GameStop, the controversial Meme stock whose massive short squeeze shocked Wall Street last month, is on the rise again. Shares rose more than 50% in premarket trading after doubling in the previous meeting due to the reported fall of a chief executive.
On Wednesday, the Dow jumped 425 points to close at a record high in a volatile session that saw the average of the 30 stocks drop more than 110 points. The S&P 500 gained 1.1% while the Nasdaq Composite erased a 1.3% loss and closed 1% higher.
“It seems pretty clear to us that interest rate developments have been driven by growing optimism about economic growth and interest rates are finally ‘catching up’ on optimistic growth prospects for equities,” said David Lefkowitz, head of Americas equities at UBS Global Asset Management. “So equity investors shouldn’t be unduly concerned.”
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