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Stock futures are flat as investors gauge the spike in bond yields


U.S. stock futures were steady in overnight trading on Monday following a rise in bond yields that pressured growth pockets of the market.

Dow futures dropped just four points. S&P 500 futures were flat % and Nasdaq 100 futures fell 0.1%.

On Monday, a rise in Treasury yields left the major averages mixed. The 10-year Treasury yield rose on economic optimism and inflation fears, briefly topping 1.5% on Monday, its highest level since June.

The Dow Jones Industrial Average on Monday gained 71 points, helped by a 5.1% gain in Dow Inc.

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The S&P 500 fell 0.3%. Nasdaq Composite fell 0.5% due to the fall in bond prices, which pushed growth names underperforming. Microsoft, Amazon, Apple and Google-parent Alphabet all closed lower.

Jim Paulsen (chief investment strategist at Leuthold Group) stated that the stock market is increasingly indicating that the U.S. economic has entered another reopening period.

Russell 2000, a small-cap benchmark stock market, rose 1.5% Monday.

Covid’s resurgence of economic activity could worsen supply chains and possibly increase inflation. Paulsen added that it had forced investors to reconsider whether they invest too much in tech growth or enough in more economically sensible investments.

Ahead of Federal Reserve Chair Jerome Powell’s testimony to Congress on Tuesday, the central bank chief said that inflation could persist longer-than-expected.

Powell stated in prepared remarks that “inflation remains elevated” and would likely continue to be so for the next few months. We are witnessing upward pressure on prices as the economy continues its reopening and spending reboundes. This is especially due to some supply issues in some industries. Although these effects were more severe and lasting than expected, they are likely to diminish and inflation will drop towards our long-term 2 percent target.

The Senate Banking Committee heard testimony from Janet Yelled, Treasury Secretary, and Powell on Tuesday. The central bank indicated last week that it was ready to begin “tapering” — the process of slowly pulling back the stimulus they’ve provided during the pandemic.

The Fed left rates unchanged but penciled in possibly one interest rate hike in 2022, followed by three apiece in the 2023 and 2024.

Market volatility was also a concern on Monday due to the possibility of a government shutdown.

Before Friday’s shutdown, lawmakers must approve a funding program. Although there may be an interim solution to extend funding, it is unlikely that the larger issue of increasing the debt ceiling will be solved for many more weeks.

Meanwhile, the House of Representatives is expected to vote on the $1 trillion bipartisan infrastructure bill Thursday, already approved by the Senate.

Thursday is the last day of trading for September and the end of the third quarter. So far this month, the Dow is down 1.4% and the S&P 500 is off by 1.8%. In September, the Nasdaq Composite lost 1.9%.

The Covid-19 delta variant, the Federal Reserve’s tapering plan, and inflation have worried investors but despite September being weaker for equities, the Dow is up nearly 14% and the S&P 500 is up more than 18% in 2021. This year, the Nasdaq gained more than 16%.

Lindsay Bell, Ally Invest said Monday that the “wall of worry” continued to grow. Market participants have valid concerns, but I think there is one thing. It’s the strength of consumers. Inflation is possible, but the consumer is strong.

— with reporting from CNBC’s Patti Domm.