News

Rising Bond Yields Drive Stock Futures Lower

Equities

Major US stock index futures tumbled sharply as the bond yields around the world extended their upside rally. The US 10-Year yields rose significantly to 1.563%, the highest in a year. The somehow-attractive return on bonds weighed on inflated stock prices, leading to a clear correction. In his semi-annual testimony, the Federal Reserve Chairman Jerome Powell seemed relaxed with the rally in yields, but the market is having another talk. The Dow Jones Industrial Average futures retreated from an all-time high of 32031 to 31141, the S&P500 futures erased Wednesday's gains and tumbled to 3801, and the Tech-heavy Nasdaq suffered the most, falling to a seven-week low of 12662.

USD

The dollar index which measures the greenback against a basket of major currencies rebounded strongly to 90.49 from a seven-week low of 89.68. The tremendous upside push in US yields along with strong US data supported the rally. The second reading of the fourth-quarter GDP showed that the US economy grew by 4.1%. Also, a remarkable drop in Initial jobless claims, which rose by only 730 thousand versus a prior reading of 841 thousand, played a good role in bolstering the dollar reversal. Fed officials were focusing lately on the soft labor market indicators, but such an improvement, if sustained could raise the chances of policy normalization sooner than expected. The EURUSD declined to $1.2129, the GBPUSD dropped to $1.3935, and the AUDUSD fell to $0.7805.

Metals

Precious metals prices extended losses as US yields edged higher along with the dollar. The price of a gold ounce fell to $1755, the lowest since July 2020, the price of a silver ounce declined to $26.75, palladium futures dropped to $2366, and platinum plunged to $1211.

Oil

Oil prices retreated from their highest level since January as the dollar strengthened with US yields rising. Market participants will start shifting their focus towards the OPEC+ meeting next week, where producers are expected to increase output gradually. However, any surprises could have a significant impact on oil prices. The West Texas Intermediate crude April delivery fell to $62.52, and the Brent blend April contract declined to $65.02.

Major Economic Events

GMT Country Event Expectation Previous

13:30

US

 Core PCE Price Index (MoM) (Jan)

0.1%

0.3%

13:30

US

 Personal Income (MoM) (Jan)

9.9%

0.6%

15:00

US

Michigan Consumer Sentiment (Feb)

76.5

76.2

18:00

US

 U.S. Baker Hughes Total Rig Count

-

306

 

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