U.S. equity futures traded higher Friday hours before the opening bell after a fall back Thursday when the yield on the 10-year U.S. Treasury note widened to 1.72%, its highest since January 2020.
|I:DJI||DOW JONES AVERAGES||33787.25||-290.38||-0.85%|
Investors are swinging between hopes the rollout of coronavirus vaccines will allow global business and travel to resume and fears of possible inflation caused by government stimulus spending and easy credit.
The market’s pullback undercut some of Wednesday's gains, when the S&P 500 and Dow hit all-time highs after the Federal Reserve said U.S. economic growth should rebound to 6.5% this year — the strongest since the 1980s — and inflation will climb above 2% for the first time in years.
Chairman Jerome Powell said the Fed will keep rates low even as inflation accelerates. Central banks usually try to restrain price rises by hiking rates. But Fed officials have said the U.S. economy will be allowed to “run hot” to avoid derailing a recovery.
A higher yield can make bonds more attractive, drawing money out of stocks, especially high-priced tech giants that powered last year's market rebound. Apple shares fell 3.4%, Microsoft lost 2.7% and Tesla slumped 6.9%.
The S&P 500 fell to 3,915.46. The Dow Jones Industrial Average lost 0.5% to 32,862.30. The Nasdaq slid 409.03 points to 13,116.17.
Bank stocks did well because investors bet higher interest rates would translate into higher profits. Wells Fargo rose 2.4%, Bank of America added 2.6% and JPMorgan Chase gained 1.7%.
Also Thursday, the Labor Department said the number of Americans who filed for unemployment benefits last week rose to 770,000, well above historic levels.
Meanwhile, Asian stock markets followed Wall Street lower on Friday after rising U.S. bond yields dampened buying enthusiasm driven by the Federal Reserve's promise of low interest rates.
Shanghai, Tokyo, Hong Kong and Sydney retreated.
The Shanghai Composite Index sank 1% to 3,426.91 and the Nikkei 225 in Tokyo lost 1.2% to 29,851.37. The Hang Seng in Hong Kong retreated 1.6% to 28,950.83.
The Kospi in Seoul shed 0.6% to 3,047.81 Sydney's S&P-ASX 200 gave up 0.6% to 6,705.20.
India's Sensex opened down 0.2% at 49,133.92. New Zealand and Singapore gained while Bangkok and Jakarta retreated.
Also Friday, Japan's central left its easy monetary policy and goal of 2% inflation unchanged but widened the band in which long-term interest rates will be allowed to rise or fall around its target to 0.25% from 0.2%.
In energy markets, benchmark U.S. crude rose 19 cents to $60.25 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the basis for international oil prices, added 22 cents to $63.50 per barrel in London.
The dollar edged down to 108.86 from Thursday's 109.00. The euro advanced to $1.1919 from $1.1915.