U.S. stock futures dropped today as rising Treasury yields brought renewed pressure to equities with lofty valuations. Contracts on the Nasdaq 100 fell 2% in early trading and S&P 500 futures were lower, tracking losses in Asia. Ten-year Treasury yields topped 1.6%, sparking a rally in European financial shares. The dollar strengthened against all its major peers.
U.S. Stock Futures
Brent crude traded near $70 a barrel after Saudi Arabia said the world’s largest crude terminal was attacked on Sunday by a drone from the sea. The missiles were intercepted and oil output appeared to be unaffected. “You will see a lot of volatility in markets,” Kim Stafford, Asia Pacific head at Pacific Investment Management Co., said on Bloomberg Television. “We believe that confidence is improving, especially with vaccines coming online, so we will see an uptick in growth globally. There are a lot of reasons to be confident in the market, but a lot of this is also priced in.”
Global markets have become preoccupied by the risks associated with rising Treasury yields and fears that government stimulus programs could overheat economic growth. Higher yields also raise questions about whether equity valuations have become excessive, especially in speculative tech shares. The Nasdaq 100 Index has fallen almost 10% since early February.
Meanwhile, China’s main stock benchmark entered a correction on Monday on concerns about liquidity conditions and lofty valuations in some of the recently favored stocks. The CSI 300 Index fell 3.5%, piercing through its 100-day moving average and putting losses from its recent February 10 peak to 13%.
The annual session of China’s National People’s Congress continues in Beijing. Japan GDP is due Tuesday. EIA crude oil inventory report is due Wednesday. The U.S. February consumer price index will offer the latest look at price pressures Wednesday. The European Central Bank holds its monetary policy meeting and President Christine Lagarde is set to do a briefing Thursday.
U.S. stock futures on the S&P 500 Index declined 1% as of 9:33 a.m. London time.The Stoxx Europe 600 Index increased 0.4%.The MSCI Asia Pacific Index fell 1.2%.The MSCI Emerging Market Index decreased 1.6%.
The yield on 10-year Treasuries climbed four basis points to 1.60%.The yield on two-year Treasuries gained one basis point to 0.15%.Germany’s 10-year yield rose one basis point to -0.29%.Britain’s 10-year yield increased one basis point to 0.762%.
The Bloomberg Dollar Spot Index jumped 0.5% to 1,151.68.The euro fell 0.4% to $1.1868.The British pound dipped 0.2% to $1.3816.The Japanese yen weakened 0.3% to 108.59 per dollar.