Stock futures pointed to a lower open on Monday as technology stocks added to last week’s losses, with Treasury yields climbing further after Congress made headway toward passing another significant COVID-19 relief package.
Contracts on the S&P 500 fell by about 0.5% ahead of the opening bell Monday morning. Nasdaq futures slid 1.5%, adding to declines after the index closed out a third straight weekly loss last week amid a drawdown in tech and growth stocks.
Treasury yields resurged across the curve, and the benchmark 10-year yield spiked to a one-year high of more than 1.61% after the U.S. Senate passed a $1.9 trillion virus relief package over the weekend, with the additional stimulus seen likely to boost the pace of the economic recovery.
The U.S. House of Representatives is poised to vote Tuesday on the Senate’s version of the stimulus bill, which includes $300 per week in enhanced federal unemployment benefits through early September, $350 billion in state and local aid and $1,400 stimulus checks to most Americans, albeit under tighter income restrictions than had been included in the earlier House version of the bill. The Senate bill, which passed on a party-line vote, is likely to be approved in the House and signed by President Joe Biden before a March 14 deadline, so as to renew pandemic-era federal unemployment benefits from mid-March through early September.
The prospects of a strong recovery enabled by both the ongoing vaccine rollout as well as the historic levels of fiscal and monetary policy stimulus have simultaneously pushed growth forecasts sharply higher, while also stoking concerns over an overly rapid rise in inflation. Jitters over an eruption of price pressures and higher interest rates have recently provoked volatility in equity markets. However, some strategists suggested these fears may be overblown, and that rising rates should be in fact taken more positively as a signal of a firming economic backdrop.
“Equities often struggle when interest rates rise sharply, particularly when driven by real rates,” Goldman Sachs equity strategist David Kostin wrote in a note Friday. “Stretched investor positioning has exacerbated the sharp recent equity market response, particularly because both hedge funds and retail investor have held large positions in long-duration equities that are particularly sensitive to interest rates.”
However, “even though the recent backup in rates has weighed on equity prices broadly, the pace of inflows into equity funds during the last few weeks has accelerated compared with the start of the year,” Kostin added. “The rotation into equity funds has most favored strategies that benefit from accelerated economic growth.”
Namely, cyclical sectors like energy and financials have outperformed for the year-to-date and especially in recent weeks, and shares of companies in high-contact industries including air travel and lodging have resurged after a difficult 2020.
7:18 a.m. ET Monday: Stock futures point to a lower open
Here’s where markets were trading ahead of the opening bell:
S&P 500 futures (ES=F): 3,819.25, down 19.75 points or 0.51%
Dow futures (YM=F): 31,457.00, down 8 points or 0.03%
Nasdaq futures (NQ=F): 12,489.50, down 174.25 points or 1.38%
Crude (CL=F): $66.26 per barrel, +$0.17 (+0.26%)
Gold (GC=F): $1,683.80 per ounce, -$14.70 (-0.87%)
10-year Treasury (^TNX): +4.2 bps to yield 1.596%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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