Stock futures are slightly higher after rising rates hit tech stocks
U.S. stock index futures inched higher during overnight trading on Wednesday, after tech stocks dipped again as investors digest the impact from higher rates.
Futures contracts linked to the Dow Jones Industrial Average gained 81%, or 0.24%. S&P 500 futures advanced 0.24%, while Nasdaq 100 futures gained 0.24%.
The Dow and S&P 500 inched higher during regular trading. The 30-stock Dow advanced about 90 points for its fifth positive session in the last six, while the S&P 500 gained 0.16%, breaking a 2-day losing streak.
In contrast, the Nasdaq Composite fell 0.24% in its fourth consecutive session of negative. The technology sector declined again on Wednesday and is now down 4% for the week, making it the worst-performing S&P group.
Tech’s decline was caused by the 10 year Treasury yield hitting a new high of 1.56% Wednesday after having risen to 1.567% Tuesday. This is putting pressure on tech stocks as it reduces the attractiveness of future cash flows.
Investors pay close attention to Washington’s latest news. On Wednesday the House passed a bill that would suspend the U.S. debt ceiling after Treasury Secretary Janet Yellen told House Speaker Nancy Pelosi on Tuesday that Congress had until Oct. 18 to raise or suspend the debt ceiling.
The Senate’s Republicans have vowed to reject the bill.
UBS sent a note Tuesday night to its clients saying that, “While political dynamics are still uneven,” they believe the US debt ceiling negotiations can succeed in time. A US government shutdown cannot be avoided. The firm stated that “Overall, we still see solid economic growth” and “a gradual tightening in monetary conditions.” UBS recommends that investors choose equities rather than bonds based on its projections.
For the week, all major averages have been in the negative. The Dow is on track for its fourth negative week in the last five, while the S&P and Nasdaq Composite are on track for their worst weeks since February.
Wells Fargo stated that it is normal to experience pullbacks. The firm explained Wednesday that this is “a normal repricing risk based upon a higher cost capital and greater market uncertainties”. It sent a note to its clients.
The data side, the initial claims of joblessness for the previous week will be published. The economists expect a print of 330,000. On Thursday, the Bureau of Economic Analysis will release its third estimate of Q2 GDP.
When it comes to earnings, Bed Bath & Beyond will report quarterly results before the market opens.
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