US Stocks Edge Lower Ahead of Jobs Report after Surging Bond Yields Fuel Steep Sell-Off

U.S. stock index futures are trading lower overnight following a steep decline in the tech-sector that dragged all the major cash indexes lower on Thursday. The catalyst behind the early selling pressure is fear of a surge in bond yields. The trading range is tight and volume is relatively low ahead of the release of a U.S. Non-Farm Payrolls report at 13:30 GMT. Economists predict the report will show the economy added 210,000 jobs in February, compared to just 49,000 in January, according to Dow Jones.

In addition to the headline figure, traders will get the opportunity to react to Average Hourly Earnings that are expected to come in unchanged at 0.2%. The Unemployment Rate is also expected to remain unchanged at 6.3%.

The U.S. Trade Balance deficit is expected to have increased to 67.5 billion from -66.6 billion. Consumer Credit is also expected to have risen to 11.8 billion from 9.7 billion.

Thursday Recap

Wall Street’s major stock indexes ended sharply lower on Thursday, leaving the NASDAQ Composite down around 10% from its February record high, after remarks from Federal Reserve Chair Jerome Powell disappointed investors worried about rising longer-term U.S. bond yields.

In the cash market on Thursday, the benchmark S&P 500 Index settled at 3768.47, down 51.25 or -1.34%. The blue chip Dow Jones Industrial Average finished at 30924.14, down 345.95 or -1.11% and the technology driven NASDAQ Composite closed at 12723.47, down 274.28 or -2.11%.

The NASDAQ Composite wiped out all of its year-to-date gains and was down about 10% from its record closing high on February 12.

Apple Inc, Tesla Inc and PayPal Holdings Inc were among the largest drags on the S&P 500. Tech stocks are particularly sensitive to rising yields because their value rests heavily on future earnings, which are discounted more deeply when bond returns go up.

Fed Chair Powell’s Comments Light the Match

U.S. stocks fell sharply on Thursday after remarks from Federal Reserve Chair Jerome Powell disappointed investors worried about rising longer-term U.S. bond yields.

Powell said the recent run-up caught his attention but he didn’t give any indication of how the central bank would rein it in. Some investors had expected the Fed chair to signal his willingness to adjust the Fed’s asset purchase program in an effort to help push down long-term interest rates.

The economic reopening could “create some upward pressure on prices,” Powell said in a Wall Street Journal webinar Thursday. Even if the economy sees “transitory increases in inflation…I expect that we will be patient,” he added.

Bond Spike Weighs on Technology Sector

The benchmark 10-year Treasury yield spiked to 1.533% after Powell’s comments, which did not point to changes in the Fed’s asset purchases to tackle the recent jump in yields. It still held below last week’s one-year high of 1.614%.

Tech stocks are particularly sensitive to rising yields because their value rests heavily on future earnings, which are discounted more deeply when bond returns go up.

“Valuations are at the high end of historic ranges, so you are seeing selling, especially in the higher valuation areas like the NASDAQ and tech in general,” said Tim Ghriskey, chief investment strategist at Iverness Counsel in New York.

For a look at all of today’s economic events, check out our economic calendar.