By Joe Wallace
Stock futures advanced Thursday, indicating that shares of giant technology companies would push higher at the opening bell as investors awaited a fresh reading on the labor market.
Futures linked to the S&P 500 rose 0.7%. Contracts tied to the Nasdaq-100 rose 1.8%, suggesting technology stocks will rebound following muted declines for the sector on Wednesday. Futures for Dow Jones Industrial Average ticked up 0.3%, a day after the blue-chips index closed at a record high.
Investors' demand for stocks has revived as bond markets have calmed. The yield on 10-year Treasury notes, which moves inversely to the price, slipped to 1.497% from 1.520% Wednesday, putting it on course for a third-consecutive day of declines. Yields climbed as high as 1.594% earlier this week.
Stocks have been buffeted by sharp moves in bond yields, fueled by uncertainty over how the $1.9 trillion relief bill passed by the House Wednesday will ripple through the U.S. economy.
Concerns that the size of the stimulus would lift inflation beyond the Federal Reserve's comfort zone and trigger an increase in interest rates recently prompted yields to rise. That sapped appetite for shares in tech companies, which had benefited from an extended spell of low rates. At the same time, optimism about the economic outlook has bolstered demand for shares of companies that would benefit from a relaxation of lockdowns.
Muted inflation data for the start of the year have calmed nerves about the outlook for rates. But bond yields will likely remain volatile, shifting momentum between different segments of the stock market, said Monica Defend, head of research at French asset manager Amundi.
"Eventually it should be positive for the equity market if we have a bit more inflation, a bit more growth," she said.
Data on the number of people filing for unemployment benefits, a proxy for joblessness, are due out at 8.30 a.m. ET. Economists surveyed by The Wall Street Journal expect that 725,000 workers filed for initial benefits last week. That would mark a small decrease from the previous week and offer a further sign of improvement in the labor market following an easing of Covid-19 case numbers.
"We're not completely out of the woods yet in terms of the unemployment rate," said Mary Nicola, a portfolio manager at PineBridge Investments. The health of the labor market will be a key determinant of when the Fed decides to raise interest rates, she added.
Investors' appetite for U.S. government debt will receive another test Thursday with the planned auction of $24 billion in 30-year bonds. The Treasury sold $58 billion of three-year notes on Tuesday and $38 billion of 10-year notes Wednesday.
In overseas markets, the Stoxx Europe 600 edged up 0.3%. Shares of travel-and-leisure, retail and basic-resource companies, which are likely to benefit from the reopening of the economy, gained ground alongside tech stocks.
The euro ticked up 0.2% to $1.1951 ahead of the latest monetary-policy decision by the European Central Bank, scheduled for 7:45 a.m. ET. Investors expect ECB President Christine Lagarde to address the recent rise in bond yields in the region in the subsequent press conference. The bank will also publish its quarterly economic forecasts for the eurozone.
"The eurozone can't afford tightening financial conditions and we've been importing that from the higher rates in the U.S.," said Ms. Defend. "It is something the ECB is looking at as a matter of concern."
Among individual European stocks, Rolls Royce rose 2.3% after the engine-maker said it expected free cash flow in the second half of 2021.
China's Shanghai Composite Index jumped 2.4% in its biggest one-day rise since October. The advance followed an article in a financial newspaper encouraging new investors to seek long-term returns and not be swayed by volatility in stocks, Deutsche Bank strategist Jim Reid said in a note.
Markets rose elsewhere in Asia, with Japan's Nikkei 225 and South Korea's Kospi gaining 0.6% and 1.9% by the close respectively.
Write to Joe Wallace at Joe.Wallace@wsj.com
(END) Dow Jones Newswires
03-11-21 0505ET
