On Monday, U.S. stock futures experienced a decline as significant technology shares faced downturns.
An hour post the US jobs report release, the yield on the 10-year U.S. government bond has stabilized around 4.75%, while the 30-year yield is approaching 5%. The less frequently traded 20-year is at 5.04%.
In the meantime, this aligns with movements observed at the shorter end of the yield curve,… pic.twitter.com/H9Kbp0XG0M— Mohamed A. El-Erian (@elerianm) January 10, 2025
The Nasdaq futures dipped over 1%, losing 0.9%, whereas Dow-linked futures fell by 36 points, translating to a 0.1% drop. Leading benchmarks have shown a downturn for the preceding two weeks, primarily due to the weakening of technology stocks.
The stronger-than-anticipated payrolls released on Friday led to increased bond yields across the yield curve and a decline in equities across the capitalization spectrum; every @SPDJIndices U.S. equity index is in the red YTD, with declines ranging from –0.7% for S&P MidCap 400 to -1.8% for S&P SmallCap 600 pic.twitter.com/yHOL4ViQWs
— Liz Ann Sonders (@LizAnnSonders) January 13, 2025
Palantir and Nvidia, notable bull market performers favored by retail investors, each dropped approximately 3% in premarket trading. Other technology companies, such as Tesla, Broadcom, and Micron, also faced losses. The surge in bond yields has been a driving force behind the sell-off in growth-oriented stocks.
On Monday, the 10-year Treasury yield reached its pinnacle since late 2023.
More than a third of S&P 500 constituents have reached a new two-month low pic.twitter.com/3mVrnqMnzW
— Liz Ann Sonders (@LizAnnSonders) January 13, 2025
“Given the current high and stubborn inflation levels, along with rapidly rising bond yields, equity investors are adopting a more cautious approach,” stated Katherine Nixon, chief investment officer for wealth management at Northern Trust. A better-than-expected jobs report on Friday triggered a spike in yields and sent stocks tumbling due to concerns over potential reductions in interest rates by the Federal Reserve.
On Friday, the Dow plummeted by 697 points. Presently, all three major indexes have fallen for the year. Investors are hoping that the commencement of the fourth-quarter earnings season will bring some stability to the markets.
Stock Market LIVE: Sensex starts 750 down, Nifty below 23200; India VIX spikes 8% https://t.co/1Ox9D1PvsN
— ET NOW (@ETNOWlive) January 13, 2025
Technology shares fall as yields rise
Banks such as JPMorgan and Citigroup will report their earnings on Wednesday, while Delta Air Lines is scheduled to announce results on Thursday. Key economic indicators this week include the December consumer price index report on Wednesday morning.
Prior to that, investors will scrutinize wholesale inflation with the December producer price index report scheduled for Tuesday. In other market developments, shares of Abercrombie & Fitch, a clothing retailer, saw an 11% drop in premarket trading despite favorable holiday sales projections. Pinterest shares fell by 3% following a downgrade from Jefferies.
Conversely, shares of Howard Hughes Corp., a real estate developer, surged by 9% after Bill Ackman’s Pershing Square proposed the formation of a new subsidiary to merge with the company. Barclays has also tempered its outlook on small-cap stocks, downgrading its opinion to neutral from positive due to the climbing yields.
In corporate news, Johnson & Johnson announced plans to acquire Intra-Cellular Therapies for $14.6 billion, resulting in a 35.5% spike in Intra-Cellular shares. Asian markets declined on Monday as investors assessed the U.S. jobs report along with trade data from China.
Mainland China’s CSI 300 index continued to decline, while Hong Kong’s Hang Seng Index also registered losses. During a meeting in Beijing, China’s central bank committed to improving foreign exchange market management to mitigate the risk of yuan “overshooting.”
