U.S. stock futures fell Monday, suggesting the major stock indexes will slide lower from record highs, as investors booked profits while weighing new political and economic uncertainties.
Futures tied to the S&P 500 declined 0.5%, indicating the benchmark index may fall from the all-time high it closed at on Friday. Contracts tied to the Nasdaq-100 edged 0.4% lower and those linked to the Dow Jones Industrial Average fell 0.7%.
Stocks have rallied in recent days on bets that a Democrat-controlled Congress will increase government spending, bolstering the economic recovery.
Market sentiment is dimming at the start of the new week as investors confront a number of risks. On the political front, House Speaker
(D., Calif) said the House may move to impeach President Trump as soon as this week. That is prompting concern that fresh rancor in Washington may diminish support for other important measures.
Recent economic data also showed that the U.S. labor-market recovery stalled in December, ending seven months of job growth, adding to concerns that the short-term outlook is getting worse. Covid-19 infection rates also remain elevated. Experts have warned this month of surges in new cases, hospitalizations and deaths after December’s holiday gatherings and travel.
“Everything is a little bit bumpier than we expected it to be a week ago,” said
chief strategist at Pictet Asset Management. “It feels like 2020 hasn’t really ended. We are in the middle of a pandemic, we are still talking about U.S. politics even more than before. The underlying story is still pretty much the same.”
The expectation of additional stimulus has pushed government bond yields higher in recent days as investors bet that on an uptick in economic growth and inflation. There is also a growing expectation that the government will issue more notes to pay for additional stimulus.
On Monday, the yield on the 10-year Treasury note was little changed, after ending Friday at about 1.105%. Yields rise when bond prices fall.
The rise in yields is raising questions about how the Federal Reserve may respond, investors said.
“Rates markets have been working with an assumption that the Fed is going to intervene to prevent a sharp increase in yields,” said Hani Redha, a portfolio manager at PineBridge Investments. “All eyes are going to be on the Fed to understand what their reaction is going to be.”
Ahead of the opening bell, shares of
fell 6.8% on concern that the social media company may face a backlash from regulators or users after it banned Mr. Trump’s personal account, citing the risk of further incitement of violence.
declined 1.7% premarket.
The broader market may be taking a breather after a rallying for much of last week, he said. The Dow on Friday notched its third record close of 2021.
“You have to step back a little bit and see the phenomenal run we’ve had over the past week, especially post the Georgia results,” said Mr. Redha. “This was a natural consolidation, some profit-taking perhaps.”
The ICE U.S. Dollar Index, which tracks the strength of the greenback against other currencies, strengthened by 0.4%. The dollar often rises when broader markets decline because many investors view it as a safe-haven currency.
Overseas, the pan-continental Stoxx Europe 600 edged down 0.3%.
China’s Shanghai Composite declined 1.1% by the close of trading, while Hong Kong’s Hang Seng edged 0.1% higher. Japan was closed for a holiday.
Write to Caitlin Ostroff at firstname.lastname@example.org