Wall Street poised for another soft start as higher bond yields continue to bite

The useful part

Things are looking down again for Wall Street today, with US futures pointing lower ahead of the open later. S&P 500 futures are down by 0.3% with Nasdaq futures down by 0.6% currently. On the charts, the fall this week isn't all too damaging after the jump higher in August.

How it works

• The tectonic shift that is taking place in the bond market US 10-year yields are continuing to push up, rising to 4.81% now.
• That is being accompanied by a surge higher in yields in the likes of Europe and Japan too.
• It is not so much a singular event but a wave that is taking over, and that can get a little spooky for broader markets.
• It becomes even more of a problem especially when it is due to inflation and/or fiscal concerns, which is the key reasoning behind the latest move.

What to take from it

That forces market players to demand a higher risk premium and that translates to a higher opportunity cost in owning expensive stocks. In the case of tech shares, suddenly valuations and earnings multiples become harder to justify. So far this week, the drop in Wall Street can be said to be rather contained.

Details worth keeping

not least with the surge higher in global bond yields in the past week. Typically, equities don't like when yields push higher. Hence, why they are more sensitive to a move up in yields.