U.S. Stock Futures Warming Up To A Recovery After Bond Selloff

Global stocks dropped on Friday, as the benchmark 10-year Treasury yield rose to a one-year high of 1.614 percent for the first time since the beginning of the pandemic, but U.S stock futures now seem en route to recovery.

Investors were taken aback on Thursday by a swift selloff in U.S. government bonds and technology stocks. Yields on U.S. Treasurys, considered among the safest assets to own, have been rising as money managers bet on a rapid economic rebound and pushed more funds into stocks and riskier assets. But the improvement in returns from bonds has also led to the view that technology stocks’ are valued too highly.

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Futures on the S&P 500, and Nasdaq 100 rose by around 0.3 percent, while those on the Dow Jones edged up 0.1 percent, suggesting a modestly stronger open for US markets later on. Yields on the 10-year US treasury note stood at 1.468percent on Friday, down around 4 basis points on the day, and down from a session high of 1.556 percent.

The spike in the 10-year-yield is scaring the stock market, according to Ryan Detrick, the chief market strategist at LPL Financial. "Could there be more inflation coming than what most think? Although the Fed isn't worried about that, the market might be."

Global stocks overall experienced carnage from the bond whiplash: the MSCI world equity index, which tracks shares in 50 countries, was 0.9 percent lower and heading for its worst week in a month. Asia saw the heaviest selling, with MSCI’s broadest index of Asia-Pacific shares outside Japan sliding more than 3percent to a one-month low, its steepest one-day percentage loss since May 2020.