U.S. stock futures pointed to a lower open Wednesday morning to extend a decline in technology shares during the prior trading day.
Contracts on the S&P 500 drifted lower to pull back further from Tuesday’s record intraday high. Nasdaq futures also dropped. Apple (AAPL) shares steadied following a decline earlier, which pulled the stock back after reaching a $3 trillion market capitalization for the first time ever at the start of the week.
Investors Wednesday morning also digested fresh upbeat economic data, as private payroll gains handily exceeded estimates for December. ADP said Wednesday that private sector employers added back 807,000 jobs during the final month of November, nearly doubling expectations as job growth picked up to help alleviate some labor shortages.
In the first few trading days of the new year, investors have piled into cyclical areas of the market, with shares of companies seen as the biggest beneficiaries of a firming economic recovery and rising interest rates outperforming. The energy, financials and industrials sectors outperformed in the S&P 500 on Tuesday, and the Dow Jones Industrial Average composed heavily of cyclical stocks rose by more than 200 points to set an all-time closing high.
Treasury yields steadied after moving sharply higher on Monday and Tuesday, which had added pressure to technology and growth stocks valued heavily on future earnings potential. The benchmark 10-year yield jumped further above 1.6% to reach its highest level since November, albeit while remaining low on a historical basis.
“[Yields are] moving sharply higher today or in the very recent past, but they’ve been stubbornly lower when you compare them to what the inflationary talk has been,” Scott Kimball, Co-Head of U.S. Fixed Income for BMO Global Asset Management, told Yahoo Finance Live on Tuesday. “There’s been lots of discussion about runaway inflation, the Fed being behind the curve. All of that would translate into a long-end — the 10, 20, 30-year portion of the yield curve — that’s a lot steeper, or materially higher even in absolute terms than it is right now.”
Meanwhile Eddie Ghabour, Eddie Ghabour, founder of KeyAdvisors Group and author of “Common Sense Bull,” told Yahoo Finance he expected the move higher in rates so far this week would ultimately prove to be a “head fake.”
“This increase in rates doesn’t concern me at all. I think it’s going to be short-lived,” he said. “The bigger concern I have right now is the fact that a lot of investors are still carrying a tremendous amount of risk heading into a year that’s going to be unprecedented when the Fed is tightening during a slowdown. It usually is not a good recipe for high-risk assets.
8:22 a.m. ET: Private payrolls grew much more than expected in December: ADP
Private sector employers added back far more jobs than anticipated in the final month of 2021, suggesting at least some widespread job vacancies were getting filled across the economy.
ADP said Wednesday that private payrolls grew by 807,000 in December. This was nearly double the 410,000 consensus economists expected, according to Bloomberg data. Employers had brought back 505,000 jobs in November, according to ADP’s revised estimate for that month.
The ADP report serves as one measure setting expectations for the “official” government jobs report due out on Friday from the Labor Department. However, ADP’s print during the pandemic especially has served as an imperfect indicator of what to expect from the Labor Department’s reports. In three of the past four months, ADP’s print overshot the Labor Department’s payrolls figure, which last came in at a disappointing 210,000 for November.
7:08 a.m. ET Wednesday: Stock futures point to a lower open
Here’s where markets were trading ahead of the opening bell:
S&P 500 futures (ES=F): -3.25 points (-0.07%), to 4,781.00
Dow futures (YM=F): -1 point (-0.00%), to 36,674.00
Nasdaq futures (NQ=F): -56.5 points (-0.35%) to 16,219.25
Crude (CL=F): -$0.04 (-0.05%) to $76.95 a barrel
Gold (GC=F): +$4.70 (+0.26%) to $1,819.30 per ounce
10-year Treasury (^TNX): -1.5 bps to yield 1.651%
6:15 p.m. ET Tuesday: Stock futures little changed
Here’s where markets were trading Tuesday evening:
S&P 500 futures (ES=F): -0.75 points (-0.02%), to 4,783.50
Dow futures (YM=F): -12 points (-0.03%), to 36,663.00
Nasdaq futures (NQ=F): -9.5 points (-0.06%) to 16,266.25
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter