Stocks Slip With Bond Yields at Pandemic High, Oil Lifts—and What Else Is Happening in the Stock Market Today

Markets see the Federal Reserve first hiking interest rates in March.

Karen Bleier/AFP/Getty Images

Stocks looked set to continue falling Monday, with bond yields holding at pandemic highs and concerns about Federal Reserve monetary policy dominating the market.

Futures for the Dow Jones Industrial Average were down 109 points, or 0.3%, after the index slipped 4 points Friday to close at 36,231. The S&P 500 was on track to start down 0.6%, while the tech-heavy Nasdaq Composite was poised to drop 1.2% at the open.

The Nasdaq is set to open at a level that is about 8% below its all-time high, hit in late November.

Markets are still adjusting to tighter monetary policy from the Fed. As high inflation looks like it’s here to stay, the Fed is planning on raising interest rates several times this year. It is also considering reducing the size of its balance sheet, which means less demand for bonds.

The expectation of higher short-term interest rates and a reduction in the balance sheet sent the price of the 10-year Treasury note down and the yield up to 1.78%, where it sits Monday. That’s a new pandemic-era high. Higher long-dated bond yields make future profits less valuable and many tech companies are valued on the expectation of sizable profits many years in the future.

“The Federal Reserve is walking a tight rope by trying to halt inflation and it is common to see market valuations contract as the market weighs what the future looks like, especially in growth companies whose earnings are all in future dollars,” wrote Tim Pagliara, chief investment officer at CapWealth. 

But the stock market has a lot to digest this week. Wednesday, inflation data will hit the wires, with economists expecting a 7.2% year-over-year rise in the consumer-price index, according to FactSet. Markets will be looking for cues as to when inflation will have peaked. The hotter inflation is, the more likely the Fed is to move quickly in removing monetary support from the economy and markets. 

Elsewhere, major banks will report earnings. JPMorgan Chase & Co. (ticker: JPM) and Wells Fargo (WFC) will report results on Friday. Investors will be watching to see if higher interest rates have slowed demand for loans. 

Overseas, the pan-European Stoxx 600 was down 0.8%, while Hong Kong’s Hang Seng Index rose 1.1%.

Here are five stocks on the move Monday:

Royal Caribbean (RCL) was down 0.4% in the U.S. premarket trade. The cruise line said Friday that it would cancel a number of coming cruises over the more contagious—but apparently milder—Omicron variant of coronavirus.

Take-Two Interactive Software (TTWO) stock fell 10% in premarket trading Monday after news broke that the company is buying Zynga (ZNGA) for $12.7 billion. That’s almost double Zynga ‘s market capitalization at Friday’s close and that stock is up 50% Monday. 

Lululemon Athletica (LULU) stock fell 5.9% after the company said it expects fourth-quarter sales and earnings to come in near the lower end of its guidance range.

Generac (GNRC) stock gained 1.2% after getting upgraded to Buy from Neutral at UBS. 

Nike (NKE) stock dropped 1.5% after getting downgraded to Hold from Buy at HSBC Securities. 

Write to Jack Denton at jack.denton@dowjones.com and Jacob Sonenshine at jacob.sonenshine@barrons.com