Surging bond yields send Nasdaq futures tumbling: markets wrap

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Treasury yields surged, Nasdaq 100 Index futures tumbled and global stocks were dragged down by concern that central banks will have to raise rates sooner than expected.

Treasuries fell across the curve, pushing two-year and 10-year yields up to levels last seen before the pandemic roiled markets. In Europe, benchmark yields on German debt were on the verge of turning positive for the first time since early 2019.

U.S. stocks were poised to drop when the market reopens from a holiday, with Nasdaq contracts down about 2% and technology stocks down in premarket trading. Tech also led the retreat in Europe, while energy shares fluctuated and Saudi stocks rallied.

Brent oil surged to the highest level in seven years, underscoring the inflation challenge facing the Federal Reserve. Easing concerns about the impact of the omicron virus strain on demand, together with shrinking inventories and geopolitical risks are contributing to forecasts of $100 per barrel crude later this year.

Intel Corp., Apple Inc. and Tesla Inc. were among the biggest declines in U.S. premarket trading. Bank of America Corp.’s January global fund manager survey showed that net allocation to the tech sector fell 20% month-over-month to 1%, the lowest since 2008, though they expect inflation to fall this year and are placing record bets on a boom in both commodities and stocks overall.

Global equities have had a volatile start to the year as investors shift out of more expensive and rates-sensitive sectors such as technology into cheaper, so-called value shares. Market participants are now waiting for the earnings season to gauge whether companies can continue delivering robust profits despite higher costs and challenges from omicron.

“With rates biased higher over the coming months, investors should be prepared for parts of the tech sector to again be challenged,” Seema Shah, chief strategist at Principal Global Investors, wrote in a note to investors. “Although rising bond yields are challenging the entire tech sector, investors must distinguish between profitless names that are a long way from demonstrating healthy earning power and mega-cap tech firms that can defend their margins.”

A gauge of the dollar rose. The yen initially declined after the Bank of Japan sat pat on policy while nudging up its inflation projection.

We’re already in a bear market, according to Dennis Gartman. The Chairman of the University of Akron’s Endowment speaks to Bloomberg’s Nathan Hager.Source: Bloomberg
For more market analysis, read our MLIV blog.

U.S. data includes Empire manufacturing Tuesday, housing starts Wednesday and jobless claims Thursday
Interest-rate decisions due from nations including Indonesia, Malaysia, Norway, Turkey and Ukraine, Thursday
EIA crude oil inventory report, Thursday

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