Nasdaq futures resume losses; Fed batters bonds

U.S. futures were mixed, with selling confined to Nasdaq 100 Index contracts, as investors bet the Federal Reserve’s faster-than-expected policy tightening may crimp highly valued technology stocks but leave opportunities in other equity sectors. Treasury yields extended a spike.

Nasdaq futures were down 0.4 per cent after the biggest slump since March for the underlying gauge on Wednesday. S&P 500 futures traded marginally higher. Yields on government bonds jumped from Japan to Germany and the U.K. The dollar fluctuated, while the yen caught a haven bid. Gilead Sciences Inc. dropped in premarket New York trading after Morgan Stanley downgraded the stock.

Minutes from the Fed’s December meeting showed officials’ increasing preference for a faster path of rate hikes and a shrinking of the bank’s US$8.8 trillion balance sheet. That could bring curtains down on unprecedented policy accommodation which underwrote asset prices through the worst of the pandemic. The Fed is now at the core of the investment outlook for 2022, overriding continuing concerns such as slowing global growth, China’s regulatory crackdown and supply bottlenecks.

“There will undoubtedly be pockets of volatility surrounding Fed meetings throughout the year, but investors shouldn’t excessively fear the Fed, especially when there continue to be exciting alpha opportunities in markets,” Madison Faller, a global strategist at JPMorgan Private Bank, wrote in an email. “Growth and inflation will be decelerating throughout 2022, but nonetheless remain above historic trend levels. We think this will call for a much lower risk of a Fed-induced material market correction.”

The minutes, released Wednesday after the close of European markets, sparked a rout in U.S. stocks concentrated in expensive technology names. The Nasdaq 100 tumbled 3.1 per cent after the release, while the 10-year Treasury rate crossed the 1.70 per cent mark.