Jerome Powell has been renominated to lead the Federal Reserve.
Alex Wong/Getty ImagesStocks were mixed on Tuesday, with Big Tech names weaker as bond yields jumped.
Futures for the Dow Jones Industrial Average indicated an open 25 points higher, after the index edged up 17 points Monday to close at 35,619. Futures for the S&P 500 were flat, while futures on the technology-heavy Nasdaq Composite were down 0.2%.
“Bond yields continue to weigh on big cap tech names,” wrote Tom Essaye, ounder of Sevens Report Research.
The 10-year Treasury yield rose to 1.65% from a 1.62% close on Monday. It’s the highest level since it neared its 2021 high of 1.75% just over a month ago. The move higher is a slight concern for investors, many of whom see the yield going above that level fairly soon, as it’s still below the rate of inflation investors expect for the long term, a rarity historically.
Higher bond yields often hurt tech stocks the most. Higher yields make future profits less valuable in current terms, and many tech companies are investing heavily today to produce large profits many years down the line.
The move lower in tech was also weighing on the S&P 500. Tech names play a major role in the index, so big moves in that sector tend to bring the index in one direction or the other.
The renomination of Jerome Powell as Federal Reserve chair has prompted investors to bring forward their expectations of when the central bank will first increase rates. Under Powell, who promised in a press conference with President Joe Biden to focus on fighting inflation, markets see an initial rate increase around June 2022.
Powell was viewed as the favorite to lead the central bank for the next four years. Runner-up Lael Brainard—a Fed governor who has been nominated as vice chair—was viewed as someone who would lead the Fed in a more dovish direction.
Compounding pressure from bond yields—and inflation fears that simmer under the surface—stocks have also been hit by a resurgence of Covid-19 in Europe, where Austria headed into a new national lockdown Monday. In Germany, the region’s largest economy, Chancellor Angela Merkel said the current surge in coronavirus infections is worse than anything the country has seen so far in the pandemic.
Overseas, the pan-European Stoxx 600 was 0.8% lower and Hong Kong’s Hang Seng Index fell 1.2%.
Oil markets were also in focus after Biden’s decision to release U.S. strategic reserves in a bid to shore up the economic recovery. West Texas Intermediate crude was down 0.2% to $76.59 a barrel. That is down from a high of $83 reached in October this year.
Here are five stocks on the move Tuesday:
Western Digital (ticker: WDC) stock rose 3.3% after getting upgraded to Buy from Neutral at Mizuho. Peer Micron Technology (MU) saw its stock gain 2.2% after getting the same upgrade from Mizuho.
Best Buy Co. (BBY) stock dropped 11% after the company reported a profit of $2.08 a share, beating estimates of $1.91 a share, on sales of $11.9 billion, above expectations of $11.6 billion.
XPeng (XPEV) jumped 4.6% after the Chinese maker of electric-vehicles reported better-than-expected third-quarter results.
Nvidia (NVDA) was one of the most actively traded stocks in the premarket, declining 0.7%.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
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