U.S. stock futures fell lower Tuesday as investors waited for Federal Reserve Chairman Jerome Powell’s testimony in Congress on the health of the economy.
Futures tied to the S&P 500 crossed 0.1%. The benchmark stock fell Monday for the fifth day in a row, the longest losing streak since February last year. Contracts for the Nasdaq-100 retreated 0.6%, indicating that technology inventories will continue to lead the market lower.
A sharp rise in US government bond yields in recent days has dampened investors’ desire for more risky assets, including equities. Equities in technology companies that have driven the broader market higher for most of the past year are seen as particularly vulnerable. This is because the valuation of many technology companies is tied to their future earnings potential. These profits are less valuable today when investors apply a higher discount rate.
The rise in bond yields “naturally causes investors and causes markets to reconsider their view of equities,”
But “the level at which bond yields are becoming really problematic for equities is far from where we are now,” Mr. Jackson.