Yields on U.S. 10-year notes dropped on Thursday to 1.687% after touching their highest since January 2020 peak of 1.754%. Yields have risen steeply in the past seven weeks on growth expectations.
At the open on Friday, Wall Street’s main indexes were set to rise. This was after a steep pullback in the previous session. Bond yields retreated from 14-month highs and oil prices retraced some losses.
In premarket trading, oil majors Chevron Corp and Exxon Mobil Corp added 0.6% each. Crude prices stabilized a day after a selloff fueled by concerns over demand.
U.S. delivery firm FedEx Corp rose 4.2% after it said quarterly profit rose more than expected on higher prices. Also, on the surging volume from e-commerce deliveries during the holiday shipping season.
Optimism over a $1.9 trillion fiscal package has accelerated a shift into economy-linked stocks. It has powered the S&P 500 and the Dow to record levels this week. Also helping was the Federal Reserve’s promise to maintain its ultra-loose policy stance for years.
However, the Nasdaq is still about 7% below its Feb. 12 all-time closing high. Technology and high-growth stocks’ valuations look expensive with a jump in yields.
On Thursday, Wall Street’s main indexes fell sharply in the final hours of trading. The Nasdaq shrank about 3% on worries about a month-long lockdown in Paris.
Some bond managers have said the recent pace of the rise in yields in the U.S. Treasury market has been unsettling. They were concerned the market could be viewed as disorderly if the momentum continues.
Stocks on the Move
Dow E-minis gained 44 points, or 0.13% at 8:18 a.m. ET, while S&P 500 E-minis were up 12.25 points, or 0.31%. The Nasdaq 100 E-minis rose 97 points, or 0.76%.
On Friday, market trading volumes are expected to rise due to “quadruple switching.” This is where futures and options expiries occur, and that typically also translates into elevated liquidity.
Yield-sensitive tech stocks added nearly 0.6%. These include Apple Inc, Facebook Inc, Netflix Inc, Amazon.com Inc, and Microsoft Corp.
Leading losses among the Dow components trading before the bell was Nike Inc which lost 1.5%. This came after it missed quarterly sales estimates due to shipping issues and a slump at brick-and-mortar stores due to the pandemic.
Also in Friday’s premarket trade, LYFT shares added 1%. This followed the company’s statement on Thursday that last week was its best since March 2020.
The ride-hailing company also said it expects positive weekly growth in its ride-share segment through the end of the year.