Futures muted, banks extend gains on high yields

By Bansari Mayur Kamdar

© Reuters/MIKE SEGAR
FILE PHOTO: Raindrops hang on a sign for Wall Street outside the New York Stock Exchange in New York

(Reuters) – U.S. stock index futures were subdued on Monday after posting losses for their first week of the new year, while big banks extended gains as U.S. Treasury yields climbed a new two-year high.

The benchmark 10-year Treasury yield hit 1.80% in early trading – a level last seen in early 2020, having shot up 25 basis points last week in its biggest move since late 2019.

Big banks like JPMorgan Chase & Co, Goldman Sachs, Bank of America Corp, Morgan Stanley and Citigroup Inc gained between 0.3% and 0.8% in premarket trading.

Megacap growth companies including Apple Inc, Amazon.com Inc, Microsoft Corp, Meta Platforms Inc and Tesla Inc fell between 0.2% and 1.1%.

Tesla led the declines with a 1.1% drop after Chief Executive Officer Elon Musk tweeted on Friday that the electric carmaker will raise the U.S. price of its advanced driver assistant software.

Many technology and growth stocks tumbled in the first week of 2022 as investors began to recalibrate their portfolios to account for a more hawkish Federal Reserve, while the banking sector gained 9.4% last week as Treasury yields rallied on rate hike expectations.

Investors await inflation data this week for cues on consumer and producer prices, and whether it will sway the trajectory of the U.S. central bank’s interest rate hikes expected to begin this year.

Markets are expecting a greater than 70% chance of an interest rate rise to 0.25% in March and at least two more hikes by year end. [FEDWATCH]

Goldman Sachs, on the other hand, expects the Fed to raise rates four times in 2022, compared to its previous forecast of three.

At 6:53 a.m. ET, Dow e-minis were up 1 points, or 0%, S&P 500 e-minis were down 5 points, or 0.11%, and Nasdaq 100 e-minis were down 49.75 points, or 0.32%.

Sportswear giant Nike fell 1.4% after HSBC downgraded the stock to “hold” along with peer Adidas due to persistent supply chain issues.

(Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Maju Samuel)