(Bloomberg) — U.S. index futures were mixed, with selling confined to Nasdaq 100 Index contracts, as investors bet the Federal Reserve’s faster-than-expected policy tightening may crimp highly valued technology stocks but leave opportunities in other equity sectors. Treasury yields extended a spike.
Nasdaq futures were down 0.5% after the biggest slump since March for the underlying gauge on Wednesday. S&P 500 futures traded little changed. Yields on government bonds jumped from Japan to Germany and the U.K. The dollar fluctuated, while the yen caught a haven bid.
Minutes from the Fed’s December meeting showed officials’ increasing preference for a faster path of rate hikes and a shrinking of the bank’s $8.8 trillion balance sheet. That could bring curtains down on unprecedented policy accommodation, which underwrote asset prices through the worst of the pandemic. The Fed is now at the core of the investment outlook for 2022, overriding continuing concerns such as slowing global growth, China’s regulatory crackdown and supply bottlenecks.
“There will undoubtedly be pockets of volatility surrounding Fed meetings throughout the year, but investors shouldn’t excessively fear the Fed, especially when there continue to be exciting alpha opportunities in markets,” Madison Faller, a global strategist at JPMorgan Private Bank, wrote in an email. “Growth and inflation will be decelerating throughout 2022, but nonetheless remain above historic trend levels. We think this will call for a much lower risk of a Fed-induced material market correction.”
The minutes, released Wednesday after the close of European markets, sparked a rout in U.S. stocks concentrated in expensive technology names. The Nasdaq 100 tumbled 3.1% after the release, while the 10-year Treasury rate crossed the 1.70% mark.
But equities showed relative calm on Thursday, while bonds extended their selloff. German 10-year borrowing costs jumped to the highest since May 2019, while their Italian counterparts surged to a June 2020 high. Japan’s benchmark yield climbed to the highest since April, while similar rates in Australia and New Zealand rose to the most since November and the U.K.’s 10-year yield jumped to an October high. The Stoxx Europe 600 index fell 1.2%.
Treasuries extended their losses Thursday, with the rates between the two-year and 10-year tenors adding at least two basis points each.
U.S. jobless claims figures released Thursday did little to change the market mood, with Nasdaq 100 futures slightly extending losses. The claims rose to 207,000 last week, the release showed, but stayed within the range of forecasts by 30 economists.
The Hang Seng Tech Index in Hong Kong, which had echoed the Nasdaq selloff by falling to the lowest level since May 2020, rebounded late in the session. Alibaba closed 5.7% higher.
Elsewhere, Bitcoin tumbled to $43,000. Crude-oil futures extended gains.
What to watch this week:
- Fed’s Bullard discusses the U.S. economy and monetary policy in an event on Thursday
- Fed’s Daly discusses monetary policy on a panel Friday
- ECB’s Schnabel speaks on a panel Saturday
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 were little changed as of 8:54 a.m. New York time
- Futures on the Nasdaq 100 fell 0.5%
- Futures on the Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 fell 1.2%
- The MSCI World index fell 0.5%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1311
- The British pound fell 0.2% to $1.3533
- The Japanese yen rose 0.3% to 115.77 per dollar
Bonds
- The yield on 10-year Treasuries advanced two basis points to 1.72%
- Germany’s 10-year yield advanced two basis points to -0.06%
- Britain’s 10-year yield advanced five basis points to 1.14%
Commodities
- West Texas Intermediate crude rose 2.3% to $79.64 a barrel
- Gold futures fell 2% to $1,789.30 an ounce
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