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Nasdaq futures fall as rate-hike expectations hit tech stocks, while investors look towards job data

The tech-heavy Nasdaq fell Tuesday.

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  • Nasdaq futures slipped Wednesday as investors looked set to sell tech stocks for a second day.
  • Rising bond yields weighed on technology companies Tuesday, with traders pivoting towards financials and energy.
  • Investors’ focus turned to non-farm payrolls data out Friday, which will show the health of the US labor market.

Futures for the Nasdaq 100 index fell Wednesday, as expectations of interest-rate hikes and strong inflation continued to weigh on tech stocks, while investors awaited key jobs data out Friday.

Nasdaq 100 futures were down 0.31% after the tech-heavy index fell 1.35% the day before. Meanwhile S&P 500 futures were down 0.05% and Dow Jones futures were 0.05% higher.

Stocks markets burst out of the blocks for 2022 Monday, with investors buoyed by signs that the Omicron coronavirus variant is milder than previous iterations and that the US economy continues to improve.

But bond yields rose Tuesday for the second day as investors digested the Federal Reserve’s plans to raise interest rates this year. Analysts said higher yields, along with bets that inflation will stay high, weighed on the Nasdaq 100.

“Rising Treasury yields in the US prompted a bout of rotation from high-growth stocks, such as technology, into value, boosting financial and industrial shares,” said Richard Hunter, head of markets at Interactive Investor.

Bond yields, which move inversely to prices, cooled slightly Wednesday. The yield on the 10-year US Treasury note slipped 2 basis points to 1.642%, although this was still well above the 1.48% level seen a month earlier.

European stocks edged higher, with the continent-wide Stoxx 600 up 0.18% and London’s FTSE 100 0.22% higher. Asian stocks moved broadly lower overnight, with Hong Kong’s Hang Seng index down 1.64% but Tokyo’s Nikkei 225 up 0.1%.

Read more: Wall Street’s biggest banks share why they’re most bullish on stocks in these 6 sectors in 2022

Tech stocks zoomed ahead for much of the coronavirus pandemic after central banks slashed interest rates and snapped up bonds. Investors, flush with cash, rushed to buy companies they thought could keep growing even as the economy wobbled.

But those stocks have stumbled in recent months, as the Fed has lined up plans to raise interest rates in 2021 and inflation has soared. These twin factors have made many tech stocks, which are often unprofitable, or barely make money, lose their appeal.

“Investors continue to rotate and are increasing their exposure towards stocks with positive inflation sensitivity like financials, energy and mining,” said Peter Garnry, head of equity strategy at Saxo Bank.

Investors focus’ has now turned to Friday’s non-farm payroll figures, which will give the latest snapshot of the US labor market. Analysts expect the US economy to have added 424,000 jobs in December, according to Bloomberg data, after an increase of 210,000 in November.

A stronger-than-expected figure is likely to raise expectations that the Fed will start hiking interest rates soon, and could spell further trouble for tech.

Elsewhere in markets, oil prices were little changed after a strong start to the year. Brent crude was up slightly to $80.04 a barrel while WTI crude was down a touch at $76.98 a barrel.

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