By Devik Jain and Sruthi Shankar

(Reuters) – Nasdaq futures fell more than 1% on Tuesday as technology heavyweights came under pressure from a surge in bond yields on expectations of higher interest rates and rising inflation.

Two-year U.S. Treasury yields soared to an 18-month peak, which weighed on the shares of high growth companies whose future earnings are directly linked.

Shares of Google-parent Alphabet (NASDAQ:) Inc, Microsoft Corp (NASDAQ:), Amazon.com Inc (NASDAQ:), Apple (NASDAQ:), Tesla (NASDAQ:) Inc and Facebook Inc (NASDAQ:) dropped about 1.5% in premarket trading. Since the outbreak of the pandemic, these stocks have been able to benefit from low interest rates. [US/]

The index and the fell on Monday, while the blue-chip Dow outperformed as investors pivoted into sectors that stand to gain the most from an economic revival.

The S&P energy sector has gained nearly 10.4% so far in September, and is on track to break a two-month losing streak.

Markets.com chief analyst Neil Wilson stated that the problem is the current inflationary pressure and slowing growth. “I don’t believe you can get the cyclical lift to offset the tech pullback.”

Fundamentally, the Federal Reserve has helped the market realize it must price-reprice.

In prepared remarks, Fed Chair Jerome Powell stated that the higher prices and the hiring problems seen in the U.S. after the pandemic may prove to be “more lasting than expected”.

Other Fed officials, including the President of St. Louis Fed James Bullard and President of Fed Bank of Chicago Charles Evans, as well as Raphael Bostic (Fed Bank of Atlanta) are scheduled to address separate events later in day.

Inflation, consumer confidence and ISM manufacturing activity data are all needed by market participants this week in order to assess the speed of recovery.

The U.S. Government funding negotiations are moving forward and the vote on President Joe Biden’s $1 Trillion infrastructure bill is also under scrutiny.

After the Fed signalled last week that it would tighten its accommodative monetary policies over the next few months amid recovery signs in the largest economy in the world, the Fed’s decision to shift away from technology names is a result.

The Russell 1000 value index, which has been underperforming its growth counterpart this year, narrowed that gap in September and now stands at 17.3%.

7:04 am. ET, were down 131 points, or 0.38%, were down 34.75 points, or 0.78%, and were down 221 points, or 1.45%.

Ford Motor (NYSE) Co rose 4.3% following the announcement by the U.S. carmaker and Korean partner SK Innovation that they will invest $11.4 million to construct an F-150 electric assembly plant as well as three US battery plants.