Nasdaq Futures Down 180 Point – Yields Rise on Stimulus Passage

U.S. stocks are seen opening lower Monday, with the richly-valued tech sector likely hard hit as investors fret over higher Treasury yields and potential inflation in the wake of the Covid-19 relief bill passing through the Senate.

At 7:05 AM ET (1205 GMT), the Dow Futures contract was down just 2 points, or 0.01%, S&P 500 Futures traded 20 points, or 0.5%, lower, and Nasdaq 100 Futures dropped 175 points, or 1.4%.

After much deliberation, the Senate passed President Joe Biden’s $1.9 trillion Covid-19 relief plan on Saturday, one of the largest stimulus packages in U.S. history. The bill will now move to a vote in the House on Tuesday, and then to Biden, who hopes to sign the bill before enhanced jobless benefits expire on March 14.

This followed Friday’s surge in U.S. employment, and adds to fears that this package will overheat the economy, leading to inflation and to the Federal Reserve tightening policies more quickly than had previously been envisaged.

The yield on the benchmark 10-Year has risen sharply in recent weeks. It currently stands at 1.60%, just off Friday’s 1.62% high – levels not seen since the start of the pandemic.

Both Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen have downplayed the rise in long-term Treasury yields, saying they are a sign of expectations for a stronger recovery, not of increased inflation concerns.

It’s the tech sector, full of stocks with very high valuations, which is suffering the most, with the Nasdaq Composite index falling for three straight weeks. Investors appear to be rotating out of the likes of Apple, Zoom and Tesla into cyclical plays that should benefit as economies reopen.

Elsewhere in the corporate sector, General Electric will be in focus Monday after the Wall Street Journal reported that the industrial conglomerate was nearing a $30 billion-plus deal to combine its jet-leasing unit with AerCap.

Adding to inflationary concerns has been the rise in crude prices, which continued Monday in the wake of a series of attacks on key Saudi Arabian oil facilities.

Yemeni Houthi forces launched missiles at the Saudi Arabian oil industry on Sunday, including Saudi Aramco’s facility at Ras Tanura, which is capable of exporting roughly 6.5 million barrels a day.

U.S. crude futures traded 0.3% higher at $66.28 a barrel, coming off its highest level since October 18, while the international benchmark Brent contract rose 0.3% to $69.55, after climbing above $70 a barrel for the first time since the pandemic began.

Elsewhere, gold futures fell 0.9% to $1,682.80/oz, while EUR/USD traded 0.4% lower at 1.1865.

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