U.S. stock futures were steady in overnight trading on Monday following a rise in bond yields that pressured growth pockets of the market.
Dow futures fell just 4 points. S&P 500 futures were flat % and Nasdaq 100 futures fell 0.1%.
On Monday, a rise in Treasury yields left the major averages mixed. The 10-year Treasury yield rose on economic optimism and inflation fears, briefly topping 1.5% on Monday, its highest level since June.
The Dow Jones Industrial Average on Monday gained 71 points, helped by a 5.1% gain in Dow Inc.
The S&P 500 fell 0.3%. The Nasdaq Composite was the relative underperformer, dipping 0.5%, as the drop in bond prices pressured growth names. Microsoft, Amazon, Apple and Google-parent Alphabet all closed lower.
“The stock market increasingly indicates that the U.S. economy has entered another reopening cycle,” said Jim Paulsen, chief investment strategist for Leuthold Group.
The small-cap benchmark Russell 2000 rallied 1.5% on Monday.
“A Covid-led resurgence in economic activity may well worsen supply chain woes and eventually reignite inflation concerns. But, for now, it has forced investors to reevaluate whether they have too much in growth and tech and not enough in economically sensitive investments,” added Paulsen.
Ahead of Federal Reserve Chair Jerome Powell’s testimony to Congress on Tuesday, the central bank chief said that inflation could persist longer-than-expected.
“Inflation is elevated and will likely remain so in coming months before moderating,” Powell said in prepared remarks. “As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, particularly due to supply bottlenecks in some sectors. These effects have been larger and longer lasting than anticipated, but they will abate, and as they do, inflation is expected to drop back toward our longer-run 2 percent goal.”
On Tuesday, Powell and Treasury Secretary Janet Yelled testify before the Senate Banking Committee. The central bank indicated last week that it was ready to begin “tapering” — the process of slowly pulling back the stimulus they’ve provided during the pandemic.
The Fed left rates unchanged but penciled in possibly one interest rate hike in 2022, followed by three apiece in the 2023 and 2024.
The potential for a government shutdown also clouded the market on Monday.
Lawmakers must act on a funding plan before the government faces a shutdown Friday. While there could be a temporary solution extending funding, the bigger issue of raising the debt ceiling may not be resolved for several more weeks.
Meanwhile, the House of Representatives is expected to vote on the $1 trillion bipartisan infrastructure bill Thursday, already approved by the Senate.
Thursday marks the final day of trading of September and the third quarter. So far this month, the Dow is down 1.4% and the S&P 500 is off by 1.8%. The Nasdaq Composite has lost 1.9% in September.
The Covid-19 delta variant, the Federal Reserve’s tapering plan, and inflation have worried investors but despite September being weaker for equities, the Dow is up nearly 14% and the S&P 500 is up more than 18% in 2021. The Nasdaq has rallied more than 16% this year.
“I think the wall of worry continued to grow,” Lindsay Bell of Ally Invest told CNBC’s “Closing Bell” on Monday. “While there are very valid concerns by market participants I do think the one thing…is the strength of the consumer. While inflation could be coming, the consumer has been resilient.”
— with reporting from CNBC’s Patti Domm.