By Will Horner and Xie Yu
U.S. stock futures were little changed Wednesday as investors awaited fresh comments from Jerome Powell a day after the Federal Reserve chairman soothed unsettled markets.
Futures tied to the S&P 500, the Dow Jones Industrial Average and the technology-heavy Nasdaq-100 inched up 0.1%.
Stock markets have wavered in recent days following a strong start to the year, with highflying tech companies leading declines. Investors said a rise in government bond yields, driven by improving growth prospects and rising inflation expectations, has accelerated a rotation out of the tech stocks that led markets higher during the pandemic, and into the stocks best placed to benefit from an end to lockdowns.
"This really is a function of economies reopening," said Brian O'Reilly, head of market strategy at Mediolanum Investment Funds. "Bond yields are rising because of good vaccination rates in the U.S. and U.K. and it's prompting a simple rotation away from everything that did well last year, the stay-at-home stocks, to the ones that didn't, the go-outside stocks."
"It's a good story in some ways, in that the market is trying to price in that economies are going to reopen," he added.
The yield on the benchmark 10-year Treasury note, which moves inversely to its price, has risen to its highest level in a year this week. On Wednesday, it retreated to 1.355%, from 1.363% Tuesday.
Mr. Powell reaffirmed Tuesday his commitment to keeping easy-monetary policies unchanged for the foreseeable future, which helped stem heavy losses among tech companies. Investors are awaiting a second day of testimony Wednesday to the Senate Banking Committee. Mr. Powell is set to speak at 10 a.m. ET.
While the Fed has stuck to the same message since the pandemic hit, the strength of the recovery could prompt it to change course sooner than many investors have been expecting, said Paul O'Connor, head of multiasset management at Janus Henderson Investors.
"Markets are expecting that to be a 2022 story, however we are seeing sizable upgrades to U.S. GDP. Somewhere in the middle of this year the discussion around tapering is going to have to take place," he said.
The latest batch of earnings reports will be in focus Wednesday. Lowe's Companies, Royal Bank of Canada and ViacomCBS are all set to release earnings ahead of the opening bell. Nvidia, Booking Holdings and L Brands will release their reports after markets close.
Data on new homes sales will also be parsed when it is released at 10 a.m. ET. The U.S. housing market has performed well during the pandemic, due in part to strong demand and low mortgage rates.
Overseas, the pan-continental Stoxx Europe 600 index rose 0.2%, led by its travel and leisure sector, which rose 1.1%.
Companies poised to benefit from an end to movement restrictions were some of the strongest performers. Travel agency TUI rose 5.8%, while cruise operator Carnival added 5.4%. Dufry, an operator of duty-free stores, gained 4.7% and airline operator IAG rose 3%.
Asia-Pacific indexes slipped. The biggest losses were in Hong Kong, where the city's government moved to capitalize on booming markets by increasing a levy on share trading. Hong Kong's benchmark Hang Seng Index dropped 3%, with Hong Kong Exchanges and Clearing falling 8.8%, even as the exchange operator unveiled record annual revenue and net profit.
Mainland China's CSI 300, which includes large companies listed in either Shenzhen or Shanghai, fell more than 2.5%, with index heavyweight Kweichow Moutai dropping more than 5%. The index has now dropped for four of the five sessions since the Lunar New Year break. Japan's Nikkei 225 fell 1.6%.
Andy Maynard, head of equities at China Renaissance Securities, said investors were getting uneasy about expensive valuations after rapid run-ups in mainland Chinese and Hong Kong markets, particularly against a backdrop of rising bond yields. In a potential sign of growing caution, he noted: "You don't see institutions buying on the dip."
Write to Will Horner at William.Horner@wsj.com and Xie Yu at Yu.Xie@wsj.com
(END) Dow Jones Newswires
02-24-21 0526ET
