Stock futures lower ahead of testimony by Fed’s Powell on economy

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Stock-index futures were mostly lower Tuesday, with tech shares continuing to lead the way down, as investors monitored a sharp rise in bond yields and prepared for testimony by Federal Reserve Chairman Jerome Powell on the economic outlook.

What are major benchmarks doing?
  • Futures on the Dow Jones Industrial Average YM00, +0.03% rose 17 points, or 0.1%, to 31,483.
  • S&P 500 futures ES00, -0.47% were down 14.85 points, or 0.4%, at 3,858.75.
  • Nasdaq-100 futures NQ00, -1.57% gave up 185.75 points, or 1.4%, to trade at 13,038.50.

Big losses for tech shares left the Nasdaq COMP, -2.46% sharply lower Monday, falling more than 2%, while also weighing on the S&P 500 SPX, -0.77%. The S&P 500 suffered its fifth straight loss, the index’s longest losing streak since a seven-day skid that ended last Feb. 28. The Dow DJIA, +0.09%, meanwhile, benefited from a rotation to more cyclically oriented stocks, eking out a gain of 27.37 points, or 0.1%.

What’s driving the market?

A sharp rise in Treasury yields have captured the attention of investors, spelling trouble for tech and other previous high fliers. Higher yields make it more difficult to justify stretched valuations. Meanwhile, shares of companies more dependent on the economic cycle have benefited, buoyed by expectations for a pickup in growth as the economy more fully reopens courtesy of aggressive fiscal stimulus, vaccine rollouts and falling COVID-19 cases.

Powell, at 10 a.m. Eastern, is set to begin the first of two days of congressional testimony. Investors will be eager to hear Powell’s remarks on the rise in bond yields and inflation expectations, though the Fed chief has previously emphasized the central bank’s determination to hold off on pulling back on monetary stimulus until inflation has surpassed its target of 2%.

Powell “will either make or break the day for investors,” said Ipek Ozkardeskaya, senior analyst at Swissquote. Powell is likely to reiterate the Fed’s support for financial markets and the economy until substantial progress is made in improving the jobs market, but he’s also certain to be questioned about rising inflation expectations, particularly after the sharp rise in the producer-price index last month.

“So the investor mood will essentially depend on Powell’s conviction to maintain his ultraloose monetary policy stance and the feasibility of carrying on with such a soft hand under the actual market circumstances,” Ozkardeskaya said.

On the fiscal front, the House Budget Committee on Monday approved a $1.92 trillion bill to carry out President Joe Biden’s coronavirus relief plan, a first step toward likely House passage by the end of the week. While the ultimate package is likely to shrink, analysts expect its final price tag to come in not far below Biden’s $1.9 trillion proposal.

Bitcoin BTCUSD, -11.08% continued to drop sharply from its high above $50,000 after Treasury Secretary Janet Yellen on Monday called the cryptocurrency an “extremely inefficient” way to conduct transactions.

Read: A tangled market web of Tesla-bitcoin-ARK Investment could spell trouble for investors, warns strategist

A round of December housing data is on tap, with the S&P CoreLogic Case-Shiller home price index and the FHFA home-price index both due at 9 a.m. A consumer-confidence index is set for release at 10 a.m.

Which companies are in focus?
  • Shares of electric-vehicle maker Tesla Inc. TSLA, -8.55% dropped more than 4% in premarket activity as bitcoin dropped sharply. Tesla earlier this month revealed that it had bought $1.5 billion of the cryptocurrency.
  • Palo Alto Networks Inc. PANW, -3.16% shares fell more than 2% after the cybersecurity company’s quarterly earnings outlook range fell short of the Wall Street consensus late Monday, while beating estimates for the previous quarter.
  • Home Depot Inc. HD, -1.36% shares fell even after the home improvement retail giant reported fiscal fourth-quarter profit and sales that rose above expectations and boosted its dividend by 10%.
  • Software-as-a-service company ZoomInfo Technologies Inc. ZI, -6.25% late Monday announced fiscal fourth-quarter results that beat expectations. Shares were up more than 8% in premarket activity.
  • Shares of RealReal Inc. REAL, +1.38% were down more than 10% after the e-commerce retailer of secondhand luxury goods late Monday delivered a wider quarterly loss and said that the pandemic had “temporarily disrupted” its path to profitability.
What are other markets doing?
  • The yield on the 10-year Treasury note TMUBMUSD10Y, 1.367% continued its rise, up 1.5 basis points at 1.371%. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index DXY, +0.14%, a measure of the currency against a basket of six major rivals, was up 0.1%.
  • Oil futures extended their rise, with the U.S. benchmark CL.1, +0.65% up 0.8% to trade above $62 a barrel. April gold futures GCJ21, +0.08% were up 0.1% near $1,810 an ounce.
  • In overseas stock trading, the pan European Stoxx 600 SXXP, -0.76% dropped 0., 9% and London’s FTSE 100 UKX, -0.18% was off 0.3%. The Shanghai Composite SHCOMP, -0.17% fell 0.2%, while Hong Kong’s Hang Seng Index HSI, +1.03% rose 1%.