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Stock futures edged down ahead of inflation data

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Stock futures fell on Tuesday night, holding lower following a prolonged rout in tech stocks. Investors were also eagerly awaiting a full list of economic results on Wednesday before the market closed during the holidays.

The interest rate hike coincided with a massive selloff in tech and growth stocks for a second day this week, with the Nasdaq falling 0.5% after Monday’s more than 1% drop. The Dow held up well and added nearly 200 points as energy and financial stocks outperformed. The 10-year Treasury yield climbed to nearly 1.7%.

“Initially, the markets were happy with the FOMC’s decision [for Fed Chair Jerome Powell’s renomination] in the sense that it was kind of a game of continuity to a certain extent. But then the rates started to rise, and a lot of people saw the rate hike as negative for large-cap technology, ”Stuart Kaiser, head of equity derivatives research at UBS, Yahoo Finance Live said. “So I think the tradeoff we’re going to have here is that technology has been the market leader, obviously it’s strong earnings growth and a driver of free cash flow for US stocks, but if you think that it’s going to come under the pressure of higher yields, so you end up with a tough sort of Catch-22. “

Investors are expected to receive a deluge of economic data on Wednesday ahead of the Thanksgiving market holiday, with U.S. stock and bond markets expected to close all day Thursday. These reports will be include weekly unemployment claims, as well as the second estimate of US GDP for the third quarter. Most importantly, the Bureau of Economic Analysis will release the October Personal Consumption Expenditure Deflator (PCE), offering an up-to-date snapshot of the extent of price increases that still trickle down to the U.S. economy.

The overall PCE deflator is forecast to rise 5.1% in October from a year ago for its fastest annual growth rate in more than three decades. Along with a slew of other data pointing to continued high inflation, investors are speculating the Federal Reserve will step in and raise benchmark interest rates from near zero levels next year in an attempt to stem the rise. prices.

According to other analysts, market action this week with a new rotation of technology and growth stocks in the face of rising rates could portend the investment environment for next year.

“Today could be an example of what we’ll see more of next year as the Fed shifts to a mode of removing liquidity from the markets and ending these pandemic-era policies, perhaps with hikes. rate at the end of the year “, Jeffrey Kleintop, Charles Schwab, Chief Global Investment Strategist, Yahoo Finance Live said. “And that means the higher valued stocks, well, they tend not to do as well in environments of rising interest rates and tighter financial conditions.”

“So you might want to look to be in sectors that maybe trading closer to their mid valuations, looking for leadership like finance, energy,” he added. “The only downside to this is that when we see these increases in COVID cases around the world, it tends to favor these lockdown defenses like technology. ”

6:16 p.m. ET Tuesday: Stock futures open lower

Here’s where the markets were trading Tuesday night:

  • S&P 500 Futures Contracts (ES = F): -4.75 points (-0.1%), to 4,683.75

  • Dow Futures (YM = F): -27 points (-0.08%), to 35,739.00

  • Nasdaq Futures (NQ = F): -17.25 points (-0.11%) to 16,294.75

NEW YORK, NEW YORK - NOVEMBER 15: A trader works on the floor of the New York Stock Exchange (NYSE) on November 15, 2021 in New York City.  Following positive economic news from China, stocks were higher on Monday morning, with investors examining retail sales and results for large US companies later this week.  (Photo by Spencer Platt / Getty Images)

NEW YORK, NEW YORK – NOVEMBER 15: A trader works on the floor of the New York Stock Exchange (NYSE) on November 15, 2021 in New York City. Following positive economic news from China, stocks were higher on Monday morning, with investors examining retail sales and results for large US companies later this week. (Photo by Spencer Platt / Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter

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