Inventory futures are flat after Dow closed a report, Verizon wins after Berkshire added to its place
US stock index futures fluctuated in early morning trading Wednesday as investors weighed the improvement in economic data against rising inflation expectations.
Futures contracts linked to the Dow Jones Industrial Average and the S&P 500 lost around 0.1%. Nasdaq 100 futures fell 0.4%.
The slight weakness was due to retail sales rising 5.3% in January, surpassing a Dow Jones estimate of 1.2%. The rise in consumer spending could further fuel inflation expectations, which have already pushed bond yields higher recently.
Signs of a pickup in price pressure were already evident as the economy recovered from the pandemic-triggered recession with historic fiscal and monetary stimulus. The producer price index for final demand rose 1.3% in January, the largest increase since the index began in December 2009.
Government bond yields continued to rise on Wednesday, with 10-year government bond yields peaking at 1.33%, a level last seen in February 2020. The 30-year rate remained stable after hitting its highest level in a year in the previous session.
Some on Wall Street believe that higher interest rates could encourage investors to switch from stocks to bonds while putting pressure on areas of the market, including technology, that have benefited from the low interest rate environment.
“We’re filling a big void as of March 2020. As long as we stay tidy and shift rates for the right reasons, that’s fine in the short term,” said Gregory Faranello, head of US Interest Rate Trading at AmeriVet Securities. “But the Fed is watching. Should the financial conditions tighten with rising interest rates, the Fed will react. And quickly.”
The 10-year benchmark rate hit an all-time low of 0.318% in March, while a historic flight to bonds took place in the depths of the coronavirus crisis.
Verizon was among the top winners in premarket trading after Warren Buffett’s Berkshire Hathaway announced a significant stake in the telecommunications giant. Shares rose 4% in premarket trading after the latest filing revealed that Berkshire bought more than $ 8 billion worth of shares in the fourth quarter, making Verizon one of the conglomerate’s six largest holdings.
Chevron stock was up 3% in premarket trading as filings showed that Berkshire also had a large stake in the energy company last quarter.
Elsewhere in the market, bitcoin topped $ 51,000 for the first time on Tuesday as the surge to new record highs continued.
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