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Dow Futures Ease From Record Highs, Treasury Yields Push Tech Lower

Bond yields and growth prospects were back in focus Tuesday as markets shrug-off the fallout from the $20 billion fire sale of media stocks trigged by Archegos Capital.

The Tuesday Market Minute

  • Global stocks trade higher as traders and investors edge back into risk markets following yesterday's media-stock fire sale triggered by a margin call at the Archegos Capital hedge fund.
  • Fallout from the $20 billion in stock sales looks contained, although the excessive leverage has some worried about pockets of risk in more opaque corners of the market.
  • Benchmark 10-year Treasury note yields surge to fresh 14-month high of 1.776% in overnight trading, while the dollar index passes the 93.00 mark for the first time since early November.
  • Oil prices slip lower as Ever Given sails through Suez Canal following Monday's rescue, with focus shifting to OPEC meeting later this week in Vienna.
  • CDC data shows 52.6 million Americans have now been fully vaccinated against the coronavirus, with more than 143.6 million doses administered as of Monday.
  • U.S. equity futures suggest a softer open on Wall Street ahead of Redbook retail sales data at 8:55 am Eastern time.

U.S. equity futures traded lower Tuesday, with tech stocks weighed down by a surge in Treasury bond yields while so-called value companies extended gains on the back of a stronger-than-expected post-pandemic rebound.

Benchmark 10-year Treasury note yields touched a fresh 14-month high of 1.776% in overnight trading, helping the dollar index trade past the 93 point mark for the first time since early November, as bond investors fretted over President Joe Biden's plans to boost infrastructure spending as part of a $3 trillion stimulus deal he'll unveil on Wednesday.

The yield moves followed a mostly positive session in Europe and Asia, with the former shaking-off concerns for any long-term impact from the Archegos Capital margin call, which triggered a fire sale of media assets last week that continued throughout the Monday session.

At present, most of the banks and prime brokerage divisions have suggested the fallout has been contained, although many investors wonder if the excessive risk found in what was meant to be a family office -- and thus only responsible for the investments of a single investor -- remains hidden in other, more opaque corners of the market.

Still, with jobs data this week likely to indicate further improvements in the labor market as states around the country re-open (much to the concern of the CDC, it has to be said) and the country's vaccination drive continues to impress, traders and investors are far more focused on a recovery scenario than they are on the implications of an over-leveraged hedge fund.

U.S. equity futures suggest a modest 25 point dip for the Dow Jones Industrial Average following its 17th record high close of the year last night, while those linked to the S&P 500 are priced for a 9 point decline.

Nasdaq Composite futures, meanwhile, are looking at another 90 point pullback that would peg the benchmark some 8% south of the record high close it reached on February 12.

A firmer U.S. dollar, which gained 0.27% against a basket of its global peers to trade at 93.196 in early European dealing, kept energy prices pinned down and pushed oil further into the red following yesterday's rescue of the grounded Ever Given container ship, which had been blocking traffic in the Suez Canal for more than five days.

WTI contracts for May delivery were marked $1.07 lower at $60.49 per barrel while Brent contracts for the same month fell 95 cents to $64.03 per barrel.

European stocks rebounded from yesterday's bank-lead declines, with the Stoxx 600 rising 0.4% to within touching distance of the all-time high it reached just prior to the start of the pandemic in 2020, paced by a 0.6% gain for Germany's DAX performance index.

Overnight in Asia, the yen slipped to a one-year low of 110.25 against the U.S. dollar, helping the Nikkei 225 to a modest 0.16% gain and a 29,432.70 point close, while the region-wide MSCI ex-Japan benchmark gained 0.44% heading into the final hours of trading.