By Steve Goldstein
European stocks rose on Monday while U.S. technology stock futures slumped, with bond yields near one-year highs as the world’s largest economy was on the verge of adding $1.9 trillion in stimulus.
The U.S. Senate over the weekend passed its version of the $1.9 trillion stimulus package, sending it back to the U.S. House for approval before President Joe Biden can sign it into law. The surge in bond yields — with the 10-year Treasury /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.59% up 64 basis points in 2021, through Friday — has led investors to rotate from assets perceived as having stretched valuations, like companies in the tech sector, and into out-of-favor sectors with less demanding valuations.
The Stoxx Europe 600 /zigman2/quotes/210599654/delayed XX:SXXP +0.89% rose 0.6%, with companies that have struggled during the COVID-19 pandemic leading the way. Cruise operator Carnival /zigman2/quotes/210414141/delayed UK:CCL +2.34% , oil services firm TechnipFMC /zigman2/quotes/206450192/delayed FR:FTI +0.33% , tourism conglomerate TUI /zigman2/quotes/207049334/delayed UK:TUI +3.97% , and shopping-mall operator Klepierre /zigman2/quotes/205805944/delayed FR:LI +0.22% topped the leader board.
Prepared-foodkit maker HelloFresh /zigman2/quotes/203376622/delayed XE:HFG +2.92% and hydrogen fuel company Nel /zigman2/quotes/201285832/delayed NO:NEL +11.14% , both up over 100% over the last 52 weeks, declined sharply.
Futures on the tech-heavy Nasdaq-100 /zigman2/quotes/210219788/delayed NQ00 +0.87% slumped 1.6%.
Florent Pochon, a strategist at French bank Natixis, said there are plenty of reasons for markets to be jittery, but he expects any tantrum for stocks to be limited as long as the Federal Reserve remains dovish.
“In terms of valuation, the U.S. 10-year does appear to be approaching fair value, bearing in mind all the uncertainty determining quite what it is,” he said. “Massive as the U.S. fiscal stimulus plan might be, it is not expected to generate elevated structural inflation, but rather deepen the country’s trade deficit.”
Shares in educational publisher Pearson /zigman2/quotes/204954587/delayed UK:PSON +2.40% fell as much as 5% before then turning around and rising 5%. The company’s results and outlook were largely in line with expectations as it set out plans to sell its international courseware local publishing businesses and occupy less property.