On Wednesday, US index futures rose slightly owing to a slight slowdown in 10-year Treasury bond yields. Concerning this fact, investors were obliged to return to cheaper tech companies after yesterday's big sell-off.
Dow Jones Industrial Average futures went up 75 points, or 0.2%. The S&P 500 futures added 0.3% and the Nasdaq-100 rebounded 0.4%. Besides, the 10-year Treasury bonds lost 2 basis points in yields and ended at about 1.50%. Yesterday, the yield was as high as 1.567%.
The technology sector faced the biggest sell-offs. I have pointed out many times that it is the sector to be hurt seriously, as other sectors will continue to be in some demand as the economy recovers from the coronavirus pandemic. The tech sector, which has been driven to its highs, may make losses in the near term. Shares of Facebook, Microsoft and Alphabet led the fall, losing more than 3%. Amazon went down more than 2%. Higher bond yields hurt the stock market as they reduce the relative value of future earnings, making stocks overvalued.
However, today at the premarket, these companies have already partially recovered their fall. Facebook, Amazon, Apple and Alphabet went up about 1%. Nvidia and Zoom Video also showed strong performance.
Most likely, if the Federal Reserve is not going to tighten its measures and interest rate expectations moderate amid lower inflation expectations, the market will resume its gains closer to the fourth quarter.
Let's discuss the pre-market data and see what companies demonstrated good performance. Besides the technology sector, Micron Technology deserves special attention. It reported quarterly earnings of $2.42 per share, 9 cents above estimates, while the chipmaker's revenue also exceeded forecasts. However, the forecast for the current quarter was below average owing to computer buyers facing a shortage of other components. The stocks were down 3.6% at the premarket.
Regarding pharma companies, Eli Lilly shares rose by 2.2% on the premarket after Citi upgraded its rating. Citi changed it after a more than 15% decline in the stocks. A recent meeting with the company's management was a stimulus as well.
Netflix (in its own style) added 1% on the premarket after announcing its purchase of video game maker Night School Studio. It did so to diversify its revenue source.
Semiconductor equipment maker ASML raised its annual sales forecast, saying it expects annual growth of 11% by 2030 as demand for its products increases. Its shares in the premarket increased by 1%.
The financial sector will be one of those to perform well later this year, so I suggest monitoring it. Shares of financial services company Affirm Holdings went up 3.6% on the premarket today after the fact that the company will offer a debit card to its customers and allow them to make cryptocurrency transactions directly from their savings accounts.
As for the future prospects of the US stock market, the downturn caused by rising US bond yields is a reminder of the Fed's effective monetary stimulus over the past year and a half. Prerequisites for the Central Bank to soon announce the cancellation of emergency stimulus measures will be a bearish signal to the market. However, the Federal Reserve is trying to make this period smooth. With any economic problems, which are likely to start due to the next wave of coronavirus pandemic, the Fed may very quickly change its mind about reducing bond purchases, continuing to stimulate the economy.
On Tuesday, Federal Reserve Chairman Jerome Powell stated to the Senate Banking Committee that inflation might persist longer than expected. This is caused by serious supply chain problems.
The material has been provided by InstaForex Company - www.instaforex.com