Stock Futures Choppy Ahead of Inflation Data
Dow futures edge higher, suggesting investors will continue to rotate away from technology stocks and into banks and other sectors that are sensitive to the economic outlook
By Updated March 10, 2021 5:04 am ET
Listen to this article
4 minutes
This feature is powered by text-to-speech technology. Want to see it on more articles?
Give your feedback below or email
audiofeedback@wsj.com.
U.S. stock futures were jittery Wednesday ahead of inflation data that will show if rising gasoline prices and waves of government stimulus funds have started to boost overall consumer prices.
Futures tied the S&P 500 ticked up 0.1%, a day after the broad market gauge gained 1.4%. Contracts on the Nasdaq-100 were relatively flat, pointing to a muted trading session for technology stocks after they surged higher in one of the best days for the sector in months.
Dow Jones Industrial Average futures rose 0.3%. The blue chips index, which has a smaller concentration of tech stocks, has outperformed the S&P 500 this year. That is because improved economic prospects are fueling bets on sectors such as banking and energy, which would benefit from a rebound, and away from the technology stocks that rallied during Covd-19 lockdowns last year.
“We have seen a genuine rotation from growth to value,” said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe. “The companies that were laggards before, like financials and energy, have ruled the roost lately.”
Investors resumed cutting their holdings of U.S. government bonds as stronger economic growth and rising inflation expectations muted their appetite for risk-free assets. The yield on the benchmark 10-year Treasury note ticked up to 1.554%, from 1.545% on Tuesday.
This year’s steep rise in yields, which had fallen as low as 0.915% at the start of 2021, has made bond returns more attractive to some investors. Combined with growing inflation expectations, that has also led them to question the value of future cash flows from technology companies.
“The market has woken up to the idea that bond yields are rising, and that should have a negative effect on some valuations” for stocks, Mr. Kassam said.
Investors are awaiting the auction of $38 billion in 10-year Treasury notes on Wednesday, with the level of demand for the new notes likely to influence yields. While financial markets are flush with U.S. government bonds issued in recent years to fund tax cuts and pandemic relief, the concentrated demand for the most recently issued 10-year Treasury notes has created a supply shortage, according to traders and analysts.
U.S. inflation data is set to be released at 8:30 a.m. ET. Investors will be watching to see whether the government’s stimulus spending has started to drive up consumer prices. Rising gasoline costs are expected to boost overall U.S. consumer prices for February. Core prices, which exclude volatile food and energy components, will likely remain tame while the economy is still dealing with fallout from Covid-19.
Federal Reserve officials have said they would allow inflation to exceed 2% for a spell, before tightening policy. That might take longer than many investors are anticipating, said Willem Sels, chief investment officer at HSBC Private Bank.
“Inflation is still capped by the fact that the demand is still relatively weak in a lot of sectors,” he said. In the longer-term, Mr. Sels expects inflation to be low, as government stimulus measures are followed by stringent belt tightening. “It will take a long time before we get to the 2% target.”
The New York Stock Exchange on Tuesday.
Photo: Spencer Platt/Getty Images
Overseas, the pan-continental Stoxx Europe 600 was relatively flat.
Asian stock markets were mixed by the close of trading. Hong Kong’s Hang Seng rose 0.5% while Japan’s Nikkei 225 was flat. China’s Shanghai Composite Index edged down less than 0.1%.
Write to Will Horner at
William.Horner@wsj.com