US open: Tech stocks point sharply lower as bond selloff continues

The US Senate passed $1.9 trillion stimulus bill, sending bond yields and the USD sharply higher. Stocks have lost their shine and the high growth tech sector looks set to underperform.

USA (1)

US futures

Dow  futures -0.1% at 31431

S&P futures -0.5% at 3818

Nasdaq futures -1.5% at 12466

In Europe

FTSE -0.5% at 6628

Dax -0.2% at 14106

Euro Stoxx +0.9%% at 3704

Learn more about trading indices


Senate passes US stimulus bill, yields jump

Over the weekend the US Senate approved the Biden administration’s $1.9 trillion covid stimulus package with only minor amendments. This is the largest stimulus package in US history.

The news comes following Friday non farm payroll report which showed that 379k jobs were added in the US in February, double what analysts were expecting. The data suggests that the labour market bottomed in December and is now on the road to recovery.

The upbeat jobs report, massive stimulus package and acceleration of the vaccine rollout programme have boosted hopes of a strong economic recovery in the US this year. Inflation expectations have also risen.

The US 10 year bond yield ticked higher to 1.60% just shy of Friday’s 1.62% a level not seen since before the pandemic. The moved boosted the US Dollar whilst taking the shine off stocks, particularly high growth tech stocks.


Tech wreck resumes

The tech sector which is full of stocks with sky high valuations is particularly under the kosh on the back of surging yields. This is reflected in the Nasdaq which has fallen over 8% across the past three weeks.

Nasdaq futures are pointing to another weaker start for the index.

The tech sell off isn’t confined to the US, tech heavy Asia came under pressure overnight. However, European shares which are more tilted towards value are outperforming global peers.


Stocks are pointing lower

US stocks are pointing to a weaker start, paring gains from Friday as bond yield concerns return to haunt the market.

Microsoft – trades -1.2% pre-market after 20,000 US organisations could be compromised following a hack of the Outlook email programme.

Amazon – 1.4% pre-market on the back of the tech selloff and after Deliveroo recorded a loss of $300 million last year. Deliveroo also announced plans to IPO in London. Deliveroo will target a valuation of $10 billion after the top line grew 54% across the year of the pandemic.

Where next for Amazon share price?

Amazon has slipped below the key psychological 3000 level pre-market. It trades below its 50 & 100 sma on  a bearish chart with the RSI supportive of further declines. 2875 offers strong support having capped losses in July and September. The bulls would need a move above 3200 50 & 1000 sma to gain traction.



FX – Dollar strengthens as yields rise

US Dollar Index is charging higher as US bond yields resume their rise. US Dollar index trades +0.25% at 92.25.

EUR/USD tumbled below 1.19 to a 4-month low. Data hasn’t been that helpful with German Industrial Production Jan -2.5% MoM, down from 1.9% in December and well short of 0.2% rise expected. However, Eurozone Investor Sentiment numbers for March were more encouraging jumping to 5 after declining -0.2% in February. Optimism surrounding the vaccine rollout and reopening of economies in the bloc has boosted morale.

GBP/USD trades -0.03% at 1.3837

EUR/USD trades -0.4% at 1.1870


Oil eases back from over $70

Oil prices are easing back after gapping sharply higher on the open. Brent surged through $70 for the first time since the pandemic started before giving back some of those gains.  Meanwhile WTI crude oil hit its highest level in over 2 years at just shy of $68, before slipping back.

Oil prices surged after Houthi rebels launched an attack on oil facilities in Saudi Arabia. As reports emerged that there was no damage to the facilities oil markers were reassured as the price came away from the highs.

The prospect of a stronger US economic recovery on the back of a stimulus package is also helping to keep oil elevated. In addition to last week’s news that OPEC won’t increase production until at least April.

Analysts Fiona Cincotta looks at the price movement in WTI and levels to watch here.

US crude trades +0.3% at $66.30

Brent trades +0.25% at $69.53

Learn more about trading oil here.

The complete guide to trading oil markets


Looking ahead

There is no major US data due to be released today.


More from Indices

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.