Stock market news live updates: Stock futures look to rebound after tech rout

Stock futures pointed to a higher open Wednesday morning after a technology-led sell-off a day earlier, with growth stocks giving back more of their 2020 gains after a key policymaker suggested interest rates might need to rise to prevent an economic overheating.

Contracts on the Nasdaq gained 0.5%, after the index fell 1.9% during Tuesday’s regular session for its worst day since March. Contracts on the S&P 500 and Dow also pointed toward a high open.

The sharp move lower in growth stocks came after Treasury Secretary Janet Yellen suggested Tuesday that interest rates might need to rise to stave off an overheating in the economy, with economic activity picking back up much faster than expected as vaccinations take place and social distancing standards get eased. She added in later remarks, however, that a near-term interest rate hike was not something she was “predicting or recommending,” as that decision lies with the Federal Reserve.

Still, some companies have also said that surging demand and supply chain shortages have pushed prices higher, hinting at signs of overheating that have worried some market participants. Mentions of inflation on first-quarter earnings calls have surged by 800% year-over-year, according to Bank of America strategist Savita Subramanian.

“I think to some extent the market is now taking a bit of a pause thinking that some of the best news may be behind us at this point on stocks, including the growth stocks, especially as we look to more reopenings,” Rob Haworth, U.S. Bank Wealth Management senior investment strategist. “I think it’s two-fold: One, a great earnings season that people wonder if it will be repeated, and two, looking more to that reopening story.”

Plus, with stocks having reached record highs last week, equities were vulnerable to a pull-back at the slightest trigger, many strategists noted. And as first-quarter earnings season winds down, investors will be left to contemplate the future policy landscape, which may be somewhat less constructive for corporate profits.

“I do think there’s a potential for a short-term bounce in volatility due to those excessive valuations and all of the uncertainty that currently stands with respect to the infrastructure spending bill, ultimately how it’s going to be funded, and certain taxation policies,” Kevin Mahn, chief investment officer at Hennion and Walsh Investment Management, told Yahoo Finance.

“But, beyond the short-term bouts of volatility, there is continued reason for optimism, whether it’s consumer confidence, whether it’s the strength in earnings, recognizing that thus far we have an 86% beat rate for the companies that have reported,” he added. “So there are reasons for optimism, but we would recommend that investors also consider adding diversification to their portfolios to help withstand those short-term bouts of volatility.”


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