(Reuters) – U.S. stock index futures edged lower on Friday as bond yields rose and growth stocks came under pressure after Federal Reserve Chair Jerome Powell’s speech cemented the central bank’s hawkish pivot.
Powell on Thursday backed moving more quickly to combat inflation and said a 50 basis point (bps) increase would be “on the table” when the Fed meets in May, resulting in the tech-heavy Nasdaq ending the session down more than 2%.
In premarket trading, megacap growth stocks Apple Inc and Microsoft Corp edged lower, while Alphabet Inc and Amazon.com Inc were muted, as investors fretted about impact of the higher-rate environment.
Interest-rate sensitive banks traded mixed. Yields on five-year notes climbed past 3%, while the two-year yields touched a new high since late 2018. [US/]
Traders now see a 88.2% chance of 50 bps hike at Fed’s May meeting and a 11.8% probability of a 75 bps increase. [IRPR]
The prospect of a more hawkish Fed has led to a rocky start to the year for equities, and in particular tech and growth shares whose valuations are more vulnerable to higher bond yields.
The Nasdaq has fallen 15.9% so far this year compared with a 7.8% decline in the benchmark S&P 500.
At 6:41 a.m. ET, Dow e-minis were down 124 points, or 0.36%, S&P 500 e-minis were down 16.25 points, or 0.37%, and Nasdaq 100 e-minis were down 52 points, or 0.38%.
Of the 88 companies in the S&P 500 that have reported earnings for the first quarter, 80.7% of them have beat market expectations as of Thursday. Typically, 66% of companies beat estimates, according to Refinitiv data.
Gap Inc slid 14.3% after the apparel company cut its forecast for quarterly sales, blaming execution challenges at its Old Navy brand and “macro-economic dynamics”.
Investors will also be awaiting a flash reading on S&P Global composite PMI data for April after market opens.
(Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Arun Koyyur)
