Nasdaq futures drop as rising yields spook tech again
Mar. 12, 2021 7:15 AM ETInvesco QQQ ETF (QQQ), DIA, SPYBy: Yoel Minkoff, SA News Editor136 Comments
- Bond jitters are resurfacing despite a festive atmosphere over stimulus checks, which could begin hitting bank accounts this weekend and supplement the missing hour of sleep on Sunday (reminder to change your clocks). This morning, the 10-year Treasury yield is up another 7 bps, returning to the 1.6% level, triggering some fresh fears for investors.
- The developments saw stock futures put under pressure this morning, but off overnight lows, led by tech shares, implying the recent uptick in demand for growth stocks was giving way at the end of the week. Dow +0.1%; S&P 500 -0.4%; Nasdaq -1.5%.
- Statistics: Data for the week up to March 10 showed investors piling into equities, while pulling money from traditional hedges and fixed income. In fact, traders put $31.5B into stocks, while taking $1.8B out of gold and $15.4B out of bonds, according to BofA Global Research. Last week also saw the third-largest flows into emerging market plays ever and the second-largest into value stocks.
- Does the latest move suggest another shakeout or does it point to a bigger trend? Take your pick, but one thing that is clear - market volatility remains in the drivers seat.
- The bulls: "While we expect conditions to remain volatile, the most recent developments on three of the main market drivers - stimulus, pandemic news, and inflation data - point to further equity upside," wrote Mark Haefele, chief investment officer at UBS Global Wealth Management. "This windfall comes on top of existing signs of pent-up demand from U.S. consumers."
- The bears: "We think the U.S. 10-year yield has further room to go and could reach 1.8%," said Sebastien Galy, a senior macro strategist at Nordea Investment Funds. "Growth stocks maintain a high sensitivity to rates, which continues to suggest that they are quite overvalued."