Jump In Bond Yields May Weigh On Tech Stocks

The major U.S. index futures are currently pointing to a lower open on Friday, with a significant move to the downside by the Nasdaq futures suggesting a substantial pullback by tech stocks.

The downward momentum on Wall Street comes as traders continue to keep a close eye on activity in the bond markets.

The yield on the benchmark ten-year note has jumped back near 1.6 percent after showing signs of stabilization over the past few sessions.

The increase in yields comes after President Joe Biden directed states to make all adults eligible for a coronavirus vaccine by May 1st.

The vaccine news combined with the new $1.9 trillion stimulus package has generated optimism about the economic outlook, reducing the appeal of bonds. Bond yields move in opposite direction to prices.

Profit taking may also contribute to initial weakness on Wall Street after the Dow and the S&P 500 ended the previous session at new record closing highs.

Stocks moved mostly higher during trading on Thursday, with the Dow and the S&P 500 reaching new record closing highs. The tech-heavy Nasdaq showed a particularly strong upward move after ending the previous session slightly lower.

The Nasdaq soared 329.84 points or 2.5 percent to 13,398.67 and the S&P 500 jumped 40.53 points 1 percent to 3,939.34. The Dow pulled back well off its best levels of the day but still closed up 188.57 points or 0.6 percent to 32,485.59.

Technology stocks helped lead the way higher amid continued bargain hunting, which led to the Nasdaq’s biggest single-day gain since last November on Tuesday.

Prior to the spike seen on Tuesday, the Nasdaq had entered correction territory, tumbling by more than 10 percent from the record high set last month.

The markets also benefited from optimism about the impact of more fiscal stimulus after the House passed a $1.9 trillion relief package, which President Joe Biden later signed into law.

Buying interest may also have been generated in reaction to a report from the Labor Department showing first-time claims for U.S. unemployment benefits fell to a four-month low in the week ended March 6th.

The Labor Department said initial jobless claims dropped to 712,000, a decrease of 42,000 from the previous week’s revised level of 754,000.

Economists had expected jobless claims to dip to 725,000 from the 745,000 originally reported for the previous week.

With the bigger than expected decrease, jobless claims fell to their lowest level since hitting 711,000 in the week ended November 7th.

The data adds to the positive picture of the labor market painted by last week’s much better than expected monthly jobs report.

Semiconductor stocks showed a substantial move to the upside on the day, extending the volatility seen over the past several sessions.

After slumping by 1.8 percent in the previous session, the Philadelphia Semiconductor Index surged up by 4.1 percent.

Networking, computer hardware and software stocks also saw considerable strength, contributing to the jump by tech-heavy Nasdaq.

Outside of the tech sector, significant strength was also visible among steel stocks, as reflected by the 3.7 percent spike by the NYSE Arca Steel Index. The index reached its best closing level in nine years.

Biotechnology, retail and gold stocks are also saw notable strength on the day, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are edging down $0.01 to $66.01 a barrel after spiking $1.58 to $66.02 a barrel on Thursday. Meanwhile, after inching up $0.08 to $1,722.60 an ounce in the previous session, gold futures are slumping $18.90 to $1,703.70 an ounce.

On the currency front, the U.S. dollar is trading at 109.07 yen versus the 108.51 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1921 compared to yesterday’s $1.1986.

Asia

Asian stocks ended mostly higher on Friday, reflecting investor optimism over the passing of the $1.9 trillion U.S. stimulus package and the European Central Bank’s move to slow the rise in long-term borrowing costs.

Chinese shares ended a choppy session higher amid renewed focus on U.S.-China relations after the Biden administration amended licenses for companies to sell to telecommunications equipment maker Huawei Technologies.

The benchmark Shanghai Composite Index rose 16.25 points, or 0.5 percent, to 3,453.08, although Hong Kong’s Hang Seng Index plunged 645.89 points, or 2.2 percent, at 28,739.72.

Japanese shares gained ground as encouraging U.S. labor market data and easing bond yields stoked hopes about a swifter economic recovery from the pandemic.

The Nikkei 225 Index jumped 506.19 points, or 1.7 percent, to 29.717.83, while the broader Topix closed 1.4 percent higher at 1,951.06.

Market heavyweight SoftBank Group rose 3.4 percent, and Screen Holdings, Tokyo Electron and Advantest surged 4-5 percent in the tech space.

Australian markets posted solid gains at the end of the week, with tech and commodity-related stocks leading the surge. The benchmark S&P/ASX 200 Index climbed 52.90 points, or 0.8 percent, to 6,766.80, while the broader All Ordinaries Index ended up 61.70 points, or 0.9 percent, at 7,014.60.

Tech shares outperformed, tracking the Nasdaq’s 2.5 percent gain overnight. Afterpay and Appen rose 2-3 percent, while Xero soared 4.9 percent.

Miners BHP and Fortescue Metals Group gained over 2 percent after a strong rebound in iron ore and metal prices. Mineral Resources surged 5.4 percent and OZ Minerals jumped 6 percent.

Origin Energy rallied 3.8 percent and Oil Search added 1.8 percent as Brent crude prices hovered near $70 a barrel.

Banks ended on a flat note after a retreat in bond yields. Southern Cross Media Group slumped 10.4 percent after broadcaster Nine Entertainment said it would not extend its regional television affiliation agreement with the company.

Seoul stocks extended gains from the previous session as inflation concerns eased. The benchmark Kospi surged up 40.69 points, or 1.4 percent, to 3,054.39.

Pharmaceutical firm Samsung Biologics jumped 3.9 percent, while chipmaker SK Hynix advanced 2.2 percent and automaker Hyundai Motor gained 1.8 percent.

Europe

European stocks have drifted lower on Friday as the sell-off in U.S. Treasuries resumes, with the yield on the 10-year notes climbing back above 1.6 percent.

The pan-European Stoxx 600 has fallen by 0.4 percent. The German DAX Index is also down by 0.5 percent, while the French CAC 40 Index is nearly unchanged and the U.K.’s FTSE 100 Index is up by 0.1 percent.

Dutch company Prosus, which owns a stake in Tencent Holdings, has come under pressure after China’s antitrust regulator fined some of its largest tech giants, including Tencent.

Berkeley Group shares have also slumped. In a trading update, the homebuilder said that profits are set to flat line this year, in line with expectations.

Meanwhile, German broadcaster RTL Group has edged higher after the company confirmed it was exploring the sale of its controlling stake in French broadcaster Groupe M6.

British luxury group Burberry has jumped after the company said it has continued to see a strong rebound since December and full-year figures will be ahead of expectations.

Real estate investment trust Hammerson has also shown a strong move to the upside despite posting a £1.7 billion loss for last year.

In economic news, German consumer price inflation rose 1.3 percent year-on-year in February following a 1.0 percent increase in January, in line with the flash estimate, latest figures from Destatits showed.

U.K. GDP declined 2.9 percent on a monthly basis in January, reversing an expansion of 1.2 percent in December, official data showed. However, this was slower than the 4.9 percent contraction economists had forecast.

Another government report revealed that the visible trade gap narrowed to GBP 9.82 billion in January from GBP 14.3 billion in December.

U.S. Economic Reports

Reflecting another jump in energy prices, the Labor Department released a report on Friday showing U.S. producer prices increased in line with economist estimates on the month of February.

The Labor Department said its producer price index for final demand climbed by 0.5 percent in February after spiking by 1.3 percent in January. The price growth matched expectations.

Excluding prices for food, energy, and trade services, core producer prices edged up by 0.2 percent in February following a 1.2 percent jump in January.

The report also showed the annual rate of growth in producer prices surged up to 2.8 percent in February from 1.7 percent in January.

Core producer prices in February were up by 2.2 percent compared to the same month a year ago, reflecting an uptick from the 2.0 percent growth in January.

At 10 am ET, the University of Michigan is scheduled to release its preliminary reading on consumer sentiment in the month of March. The consumer sentiment index is expected to rise to 78.5 in March after dipping to 76.8 in February.

Stocks In Focus

Shares of Poshmark (POSH) are moving sharply lower in pre-market trading after the online marketplace for secondhand goods reported better than expected fourth quarter revenues but provided disappointing guidance.

Cosmetics retailer Ulta Beauty (ULTA) may also come under pressure after reporting fourth quarter results that beat estimates but lowering its comparable sales outlook. Ulta also announced the departure of CEO Mary Dillon.

On the other hand, shares of Novavax (NVAX) are seeing significant pre-market strength after the drugmaker said its COVID-19 vaccine candidate demonstrated high levels of efficacy against original and variant strains in U.K. and South Africa trials.

Victoria’s Secret parent L Brands (LB) is also likely to see initial strength after the raising its first quarter earnings guidance, announcing a new $500 million share repurchase plan and reinstating its dividend.