Stock futures pointed to a mixed open Monday morning, with technology stocks under renewed pressure as investors anticipated higher interest rates this year and looked ahead to several economic data and earnings reports later this week.
Contracts on the S&P 500 ticked down, after the blue-chip index closed out its first week of trading for the new year in the red. Nasdaq futures declined to extend losses following the Nasdaq Composite’s worst week since February 2021. Dow futures hugged the flat line.
Treasury yields were little changed to slightly higher, and the benchmark 10-year yield briefly topped 1.8% to reach its highest level since January 2020.
“The surge in rates since early December has crushed the valuation of stocks with high growth and low margins, but a well-ordered progression of Russell 3000 stocks implies further repricing,” Goldman Sachs chief equity strategist David Kostin wrote in a note.
“We have previously shown the speed of rate moves matters for equity returns,” Kostin added. “Equities typically struggle when the 5-day. or 1-month change in nominal or real rates is greater than 2 standard deviations. The magnitude of the recent yield qualifies as a 2+ standard deviation event in both cases.”
The move higher in yields and volatility across U.S. equities came after the release of the Federal Reserve’s December meeting minutes mid-last week. These suggested some central bank officials were eyeing a quicker start to interest rate hikes and balance sheet runoff process than many market participants had expected. Goldman Sachs economists now predict the Fed will raise interest rates four times this year — or one time more than the firm previously expected — and that the central bank’s balance sheet reduction will begin in July or earlier.
Last week’s “price action in 10-years was all about what the Fed will do with its balance sheet,” Nicholas Colas, co-founder of DataTrek Research, wrote in a note. “We’ll know more on Tuesday, with [Federal Reserve Chair Jerome Powell’s] renomination hearing set for 10 a.m. One thing we’re…