Tech-Heavy Nasdaq May Benefit From Drop By Treasury Yields

The major U.S. index futures are currently pointing to a mixed opening on Monday, with the major U.S. stock indexes likely to move in opposite directions once again.

The major index futures are currently pointing to a mixed open, with the Nasdaq futures up by 84 points but the Dow futures down by 48 points.

The tech-heavy Nasdaq appears poised to benefit from strength among technology stocks amid a decrease in U.S. treasury yields.

After hovering near its highest levels in over a year in the previous session, the yield on the benchmark ten-year note has shown a notable move to the downside.

Overall trading activity may be somewhat subdued, however, as traders look ahead to two days of Congressional testimony by Federal Reserve Chair Jerome Powell.

Powell is set to testify about the Coronavirus Aid, Relief, and Economic Security Act, with the Fed chief appearing before the House Financial Services Committee on Tuesday and the Senate Banking Committee on Wednesday.

After ending Thursday’s session sharply lower, U.S. stocks turned in a mixed performance during trading on Friday. While the Nasdaq rebounded after Thursday’s sell-off, the Dow showed a notable move to the downside.

The major averages finished the day on opposite sides of the unchanged line. The Nasdaq climbed 99.07 points or 0.8 percent to 13,215.24, but the Dow slid 234.33 points or 0.7 percent to 32,627.97 and the S&P 500 edged down 2.36 points or 0.1 percent to 3,913.10.

For the week, the major averages all moved lower. The Dow fell by 0.5 percent, while the Nasdaq and the S&P 500 both declined by 0.8 percent.

The rebound by the Nasdaq came as traders look to pick up technology stocks at reduced levels following the 3 percent nosedive by the tech-heavy index on Thursday.

Traders kept a close eye on activity in the bond market after a spike in treasury yields contributed to Thursday’s sell-off by tech stocks.

Yields pulled back sharply at the start of trading but subsequently rebounded and spent the rest of the session lingering near the unchanged line.

Meanwhile, a steep drop by shares of Nike (NKE) weighed on the Dow after the athletic apparel and footwear giant reported fiscal third quarter earnings that beat expectations but weaker than expected revenues.

Financial stocks also moved to the downside after the Federal Reserve said a temporary change to the supplementary leverage ratio, or SLR, for depository institutions will expire as scheduled on March 31, 2021.

The temporary change, which allowed banks to hold less capital against Treasuries and other holdings, was made to provide flexibility for depository institutions to provide credit to households and businesses in light of the COVID-19 pandemic.

Natural gas stocks showed a substantial move to the upside on the day, driving the NYSE Arca Natural Gas Index up by 2.3 percent.

The rally by natural gas stocks came amid a notable increase by the price of the commodity, with natural gas for April delivery jumping $0.054 or 2.2 percent to $2.535 per million BTUs.

Significant strength also emerged among retail stocks, as reflected by the 1.7 percent gain posted by the Dow Jones U.S. Retail Index.

Biotechnology and semiconductor stocks also turned in strong performances, contributing to the advance by the tech-heavy Nasdaq.

On the other hand, banking stocks came under pressure following the news from the Fed, with the KBW Bank Index falling by 1.7 percent.

Commodity, Currency Markets

Crude oil futures are slipping $0.18 to $61.24 a barrel after jumping $1.42 to $61.42 a barrel last Friday. Meanwhile, after climbing $9.20 to $1,741.70 an ounce in the previous session, gold futures are falling $10.70 to $1,731 an ounce.

On the currency front, the U.S. dollar is trading at 108.81 yen versus the 108.88 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1923 compared to last Friday’s $1.1904.

Asia

Asian stocks turned in a mixed performance on Monday as concerns persisted about a recent surge in global bond yields and the prospects of a global economic recovery.

Chinese shares rallied as China kept its benchmark lending rate for corporate and household loans unchanged for an 11th straight month at its March fixing, as widely expected.

The benchmark Shanghai Composite Index jumped 38.78 points, or 1.1 percent, to 3,443.44, while Hong Kong’s Hang Seng Index edged down 0.4 percent to 28,885.34.

Japanese shares tumbled, with automakers succumbing to heavy selling pressure after Renesas Electronics Corp. said it has halted some of the production lines at its main factory due to a fire.

Shares of the semiconductor maker plunged 4.9 percent, while automakers Honda Motor and Toyota Motor fell 3.6 percent and 3.3 percent, respectively.

The Nikkei 225 Index ended down 617.90 points, or 2.1 percent, at 29,174.15. The broader Topix closed 1.1 percent lower at 1,990.18.

The Japanese government lifted the state of emergency in the Tokyo area on Sunday despite growing concerns about a resurgence of new infections and increasing cases of new strains of the coronavirus.

Australian markets rebounded from a three-week low, with banks and casino operators leading the surge. The benchmark S&P/ASX 200 Index rose 44.30 points, or 0.7 percent, to 6,752.50 while the broader All Ordinaries Index ended up 35.40 points, or 0.5 percent, at 6,995.

Crown Resorts soared 21.4 percent after Blackstone Group Inc. offered to buy the troubled casino operator in an A$8.02 billion ($6.2 billion) deal. Rival SkyCity Entertainment rallied 3.9 percent, Tabcorp gained 2.4 percent and Aristocrat Leisure added 1.5 percent.

Banks ANZ and CBA rose about half a percent after they have reached a settlement in the U.S. rate rigging class action brought against them and a few other banks in 2016. NAB and Westpac gained 0.7 percent and 0.6 percent, respectively.

Insurers IAG, Suncorp and QBE dropped 2-3 percent fell after flash floods in the east coast stoked expectations of increased claims. Telecommunications giant Telstra rose 1.3 percent after announcing a major corporate shake-up.

Energy stocks such as Woodside Petroleum and Santos rose over 2 percent, while miners fell heavy after iron ore prices came under pressure in China.

Seoul stocks ended lower for the second day running given the recent volatility in bond yields. The benchmark Kospi slipped 4.07 points, or 0.1 percent, to finish at 3,035.46 amid selling by both foreigners and institutional investors.

While chemical and bio shares slumped, steel and machinery shares rose on expectations of improved global demand.

Europe

European stocks are mixed in cautious trade on Monday, with the turmoil in the Turkish lira and concerns over rising Covid-19 cases in the region keeping investors worried.

The Turkish lira slumped toward a record low versus the dollar after President Recep Tayyip Erdogan ousted central bank chief Naci Agbal for hiking interest rates to contain double-digit inflation.

The move came two days after the Central Bank of the Republic of Turkey hiked its benchmark policy rate by 200 basis points to 19 percent to tame its high inflation rate.

In a statement on Sunday, the central bank said it “will continue to use the monetary policy tools effectively in line with its main objective of achieving a permanent fall in inflation.”

On the Covid-19 front, markets are bracing for another wave of coronavirus infections and new restrictions in Europe ahead of the Easter holiday break.

German authorities are expected to extend lockdown measures again and possibly tighten some restrictions amid an upward curve of Covid-19 infections in Europe’s biggest economy.

The U.K. government will ask MPs to extend coronavirus restrictions for a further six months so that furloughs can continue to apply even after all measures have possibly been scrapped, Health Minister Helen Whately told BBC Breakfast.

While the French CAC 40 Index is down by 0.3 percent, the U.K.’s FTSE 100 Index is up by 0.1 percent and the German DAX Index is up by 0.2 percent.

Eurozone banks with exposure to Turkey slumped, with Spain’s BBVA showing a significant move to the downside.

Pharmaceutical company Novartis has also declined after appointing Karen L. Hale as Chief Legal Officer.

Gold mining company Centamin has also dropped, reversing early gains after posting a significantly higher profit for 2020 and reaffirming its 2021 guidance.

Veolia shares have also fallen. The company, which vows to pursue its hostile takeover of utility rival Suez SA, said Sunday that it will not sell or exchange its 29.9 percent stake in the capital of Suez. Shares of Suez rose about half a percent.

On the other hand, Roche has risen. The Swiss pharmaceutical major said that a Phase 3 study on its monoclonal antibody drug Tecentriq met the primary endpoint of providing disease-free survival to lung cancer patients.

AstraZeneca has also shown a notable move to the upside after its Covid-19 vaccine was found effective in a U.S. trial.

British home improvement retailer Kingfisher has also surged higher after it reported a 44 percent jump in annual profit.

Eurofins Scientific has also advanced. The testing laboratories company announced the launch of its GSD NovaType II, its upgraded RT-PCR kit for the identification of mutations associated with SARS-CoV-2 variants of concern.

U.S. Economic Reports

Federal Reserve Chair Jerome Powell is scheduled to participate in a virtual discussion titled “How Can Central Banks Innovate in the Digital Age?” at the Bank for International Settlements Innovation Summit at 9 am ET.

At 10 am ET, the National Association of Realtors is due to release its report on existing home sales in the month of February. Economists expect existing home sales to tumble by 3.0 percent to an annual rate of 6.49 million.

Richmond Federal Reserve President Thomas Barkin is scheduled to speak before a virtual National Association for Business Economics 2021 NABE Policy Conference to Explore Post-COVID Economic Policy Challenges at 10:30 am ET.

At 1 pm ET, San Francisco Federal Reserve President Mary Daly is due to host “The New Future of Work: Future of Education” virtual event.

Federal Reserve Vice Chair Randal Quarles is scheduled to give virtual keynote remarks on LIBOR transition at the SOFR Symposium: The Final Year, an Alternative Reference Rates Committee Webinar at 1:30 pm ET.

At 7:15 pm ET, Federal Reserve Governor Michelle Bowman is due to speak virtually on the economic outlook and prospects for small business to the Oklahoma City Economic Club.

Stocks In Focus

Shares of Kansas City Southern (KSU) are moving sharply higher in pre-market trading after the railroad operator agreed to be acquired by Canadian Pacific (CP) in a stock and cash transaction representing an enterprise value of approximately $29 billion.

Solar power company Sunrun (SUN) is also likely to see initial strength after Susquehanna Financial initiated coverage of the company’s stock with a Positive rating.

On the other hand, shares of JetBlue Airways (JBLY) may move to the downside after the airline announced it intends to offer $650 million aggregate principal amount of convertible senior notes due 2026.