Volatility takes over Wall Street in last trading session

On Friday, stock-index futures traded mostly higher in uneven price action. It happened after rising Treasury yields sparked a tech-led selloff. It left the Nasdaq Composite with its most significant one-day loss since October. 

Dow Jones futures today are down 0.43% 0.2%, to 31,313. Those of the S&P 500 saw a 0.18% increase, they were up 3 points, or 0.1%, to trade at 3,831. Nasdaq-100 futures climbed by 25.25 points, or 0.2%, at 12,857. 

Wall Street closed with losses yesterday. The Dow DJIA, -1.75%, dropped just a modest of 560 points, or 1.8%. Meanwhile, the S&P 500 SPX, -2.45%, fell 2.4%. Both indexes saw the most significant one-day decline since late January. The tech-heavy Nasdaq Composite COMP, -3.52% plummeted 3.5%, for its biggest one-day fall since October.

This week’s rising yields confused investors

Analysts think that the momentum that pushed stocks to record highs in early February met resistance amid a sudden and steep rise in bond yields. The US 10-year Treasury rate briefly spiked yesterday. A rapid rise in the bond rate is used as a benchmark for mortgage rates and auto loans. The bond market reacts to the positive economy as vaccines are rolled out and GDP forecasts improve, which should benefit corporate profits. But the move could also indicate faster-than-expected inflation going forward. The Fed is not worried about it. However, the market might be.

The yield on the 10-year Treasury note TMUBMUSD10Y, 1.478%, increased 13 basis points Thursday to finish at a more-than-one-year high at 1.51%. Yields dropped Friday morning again. The 10-year rate decreased by 4.7 basis points at 1.473%.

Shares of tech companies are seen as particularly vulnerable to a rise in yields. Bond Yields increase confused investors earlier this week. However, Fed Chairman Jerome Powell’s speech on Tuesday and Wednesday soothed the market participants. Powell stated that the economy remained far from recovery, and the central bank was committed to waiting until inflation topped its 2% target. Then it will move to begin easing up on its stimulus efforts. 

Han Tan, a market analyst at FXTM, said in a note that investors find it difficult buying into the Fed speak. They insist that it is too early to talk about tapering. Market participants believe that improving US economic conditions will persuade the central bank into tightening their policy settings sooner than expected. Fed funds futures are already pointing to an interest rate hikeincrease that’s brought forward to the end of 2022, from 2024, Tan said.