S&P 500 futures fall as yields rise earlier than an replace from the Fed

U.S. stock futures fell Wednesday as investors await the outcome from the Federal Reserve’s two-day policy meeting and comments from Fed Chair Jerome Powell later in the day.

S&P 500 futures traded 0.4% lower. Nasdaq 100 futures lost 1.1% as technology shares got hit by rising bond yields again. Apple, Alphabet, Facebook and Netflix all slid at least 1% in premarket trading. Tesla shed 4% in early trading. Dow Jones Industrial Average futures were flat.

The 10-year Treasury yield rose to a fresh 13-month high in early trading. The yield climbed 5 basis points above 1.67%, the highest since early February 2020 and exceeding its recent high on Friday of 1.642%. Higher rates erode the value of future cash flows, hurting growth-oriented companies particularly hard.

On Wednesday, the Fed will release new economic and interest rate forecasts, which could indicate Fed officials expect to raise rates by, or even before, 2023. The central bank is expected to acknowledge stronger growth, which should put the Fed’s easy policies in the spotlight, especially given the new $1.9 trillion in federal stimulus spending.

Investors will also hear from Fed Chair Powell, who is likely to move the stock and bond markets with his commentary, despite being unlikely to offer specifics.

“There’s this assumption [Powell’s] going to be dovish tomorrow. With another round of spending, it’s hard for him not to be dovish. They are definitely afraid of scaring the market. They’re afraid of disrupting the recovery,” said Peter Boockvar, chief investment officer of Bleakley Advisory Group.

Rising interest rates have been an overhang for stocks in recent weeks, specifically the tech sector. The jump in yields has forced a shift into value stocks from growth, pushing the Dow Jones Industrial Average and S&P 500 to hover near record highs.

A strong vaccine rollout and the easing of state lockdown restrictions have also boosted reopening stocks.

Royal Caribbean and Carnival cruise lines gained about 1% apiece in early premarket trading Wednesday. Shares of McDonald’s rose 1% after Deutsche Bank upgraded the stock to buy from hold.

On Tuesday, the Dow lost nearly 130 points, dragged down by a near 4% drop in Boeing’s stock. The 30-stock average snapped a seven-day winning streak, The S&P 500 dipped 0.16%, after setting a record high during the trading session.

The Nasdaq Composite was the relative outperformer, rising 0.09% as Facebook, Amazon, Apple, Netflix and Google-parent Alphabet all registered gains. The technology-heavy index was up more than 1% at one point in the session.

—CNBC’s Patti Domm contributed to this report.

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