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(Reuters) -U.S. stock were set to open lower on Monday as rising U.S. Treasury yields amid prospects of aggressive monetary policy tightening weighed on growth stocks, with the sentiment taking a hit from fears of a sharp economic slowdown in China.
The Nasdaq futures tumbled 2.1% as megacap stocks Microsoft Corp (NASDAQ:MSFT), Amazon.com (NASDAQ:AMZN), Apple Inc (NASDAQ:AAPL), Google-owner Alphabet (NASDAQ:GOOGL) Inc, Meta Platforms and Tesla (NASDAQ:TSLA) Inc fell between 2.2% and 4.3%.
Yield on the benchmark 10-year Treasury note rose to 3.16%, its highest level since November 2018, as data last week underscored strength in the U.S. economy and investors bet on bigger rate hikes by the Federal Reserve to curb inflation. [US/]
After a 50 basis points increase in interest rates this month by the U.S. central bank, most traders expect it to raise it by another 75 basis points at its June meeting. [IRPR]
“The market is focused on long-term interest rates. The higher they go, the more they’re afraid of a recession or a stagflation economy,” said Christopher Grisanti, chief equity strategist at MAI Capital Management in Cleveland, Ohio.
“The fear has become so great that everything is getting sold, the proverbial putting baby out with the bathwater.”
Technology-focused growth stocks have faced the brunt of the selloff this year as their returns and valuations are discounted more deeply when yields rise.
The tech-heavy Nasdaq recorded its lowest close since 2020 on Friday, notching a fifth straight weekly loss, its longest losing streak since the fourth quarter of 2012.
The S&P 500 growth index has dropped nearly 21% so far this year compared to a 13.5% fall in the benchmark index.
Oil prices fell and stocks in Asia and Europe tumbled on Monday, sparked by weak China data and a tightened COVID lockdown in Shanghai that deepened investor fears that the global economy is headed for a slowdown. [GLOB/MKTS]
At 08:15 a.m. ET, Dow e-minis were down 417 points, or 1.27%, S&P 500 e-minis were down 67.5 points, or 1.64%, and Nasdaq 100 e-minis were down 270.25 points, or 2.13%.
Investors will also keep an eye on the U.S. inflation data for April and comments from Fed policymakers this week for more clues on the path to interest rate hikes.
The first-quarter earnings season is in the final stretch. Of the 434 companies in the S&P 500 that have reported results as of Friday, 79% have topped analysts’ average estimate, according to Refinitiv.
Coty (NYSE:COTY) Inc rose 3% after the cosmetics maker raised its full-year profit outlook on resilient demand for its high-end fragrances and skincare products.
Morgan Stanley (NYSE:MS) fell 1.5% to lead declines among the big banks.
