Friday March 5th

5-03-2021

Stock futures rebound slightly from steep sell-off

U.S. stock index futures rebounded slightly Friday following a tech-led rout on Wall Street amid a surge in bond yields. Futures on the Dow Jones Industrial Average rose 90 points or 0.3%. S&P 500 futures gained 0.35%. Nasdaq 100 futures added 0.25%. Earlier, Dow futures were down as much as 200 points. All eyes will be on the February jobs report, which is set to be released at 8:30 a.m. ET. Economists expect 210,000 payrolls were added in February, compared to just 49,000 in January, according to Dow Jones. The move in futures followed a sharp sell-off triggered by Federal Reserve Chair Jerome Powell’s remarks on rising bond yields. The Fed chair said the recent runup caught his attention but he didn’t give any indication of how the central bank would rein it in. Some investors had expected Powell to signal his willingness to adjust the Fed’s asset purchase program. The economic reopening could “create some upward pressure on prices,” Powell said in a Wall Street Journal webinar Thursday. Even if the economy sees “transitory increases in inflation … I expect that we will be patient,” he added. The 10-year Treasury yield jumped back above 1.5% following Powell’s comments. The benchmark rate had stabilized earlier this week after a spike to 1.6% last week amid higher inflation expectations. On Friday morning, the 10-year Treasury yield was down by 1 basis point to 1.55%. “Equity investors, in our conversations, are really grappling with two things they may not have had to deal with for the last 10 years,” said Tom Lee, Fundstrat’s co-founder head of research. “One is the potential for inflation to actually have to be priced into equities. I think there’s a lot of confusion.” “Then it’s a bond market that seems to be testing the Fed, which kind of scares people,” added Lee, who believes the sell-off this week is a buying opportunity. Tech stocks led the market decline Thursday, especially those with high valuations and small or no profitability. The Nasdaq Composite dropped 2.1% Thursday, bringing its losses this week to 3.6%. The tech-heavy benchmark also turned negative for the year and fell into correction territory, or down 10% from a recent high, on an intraday basis. Tesla shares were off their lows in Friday premarket trading but still down 0.3%. The S&P 500 and the Dow both fell more than 1% Thursday, headed for a losing week. Energy outperformed with a 2.5% gain in the previous session amid a jump in oil prices. “Rates soared once again, which opened the door for more selling of technology stocks,” said Ryan Detrick, chief market strategist at LPL Financial. “The bright side is the economy continues to improve and leadership from financials and energy is something that suggests this isn’t a sell everything moment.” Shares in Asia-Pacific were mostly lower Friday as investors watched bond yields as well as technology stocks in the region. Mainland Chinese stocks closed mixed. The Shanghai composite declined fractionally to 3,501.99 and the Shenzhen component dipped slightly to 14,412.31, while the Shenzhen composite gained 0.171% to 2,298.60. Chinese Premier Li Keqiang announced the world’s second-largest economy would target growth of over 6% for 2021. Hong Kong’s Hang Seng index closed 0.47% lower at 29,098.29. In Japan, the Nikkei 225 slipped 0.23% to close at 28,864.32 while the Topix index finished its trading day 0.61% higher at 1,896.18. South Korea’s Kospi fell 0.57% to close at 3,026.26. Oil prices jumped more than 2% on Friday, hitting their highest in nearly 14 months after OPEC and its allies agreed not to increase supply in April as they await a more substantial recovery in demand. Brent crude futures were up $1.75, or 2.6%, at $68.49 a barrel by 1250 GMT and West Texas Intermediate (WTI) crude futures climbed $1.49, or 2.3%, to $65.32 as both remained on track for weekly gains. Gold slumped to a near nine-month low on Friday as higher bond yields and a stronger dollar continued to erode its appeal, with the U.S. Federal Reserve also dampening hopes it could take steps to rein in the soaring yields. Spot gold was down 0.2% at $1,694.25 per ounce, having earlier touched its lowest since June 8 at $1,686.40. It has fallen 2% so far this week. U.S. gold futures were down 0.5% at $1,691.40 per ounce.