US STOCKS-Futures muted, banks extend gains on high yields

BY Reuters | TREASURY | 01/10/22 07:17 AM EST

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* Futures: Dow flat, S&P off 0.11%, Nasdaq down 0.32%

By Bansari Mayur Kamdar

Jan 10 (Reuters) - U.S. stock index futures were subdued on Monday after posting losses for their first week of the new year, while big banks extended gains as U.S. Treasury yields climbed a new two-year high.

The benchmark 10-year Treasury yield hit 1.80% in early trading - a level last seen in early 2020, having shot up 25 basis points last week in its biggest move since late 2019.

Big banks like JPMorgan Chase & Co (JPM), Goldman Sachs (GS) , Bank of America Corp (BAC), Morgan Stanley (MS) and Citigroup Inc (C) gained between 0.3% and 0.8% in premarket trading.

Megacap growth companies including Apple Inc (AAPL), Inc (AMZN), Microsoft Corp (MSFT), Meta Platforms Inc (FB) and Tesla Inc (TSLA) fell between 0.2% and 1.1%.

Tesla led the declines with a 1.1% drop after Chief Executive Officer Elon Musk tweeted on Friday that the electric carmaker will raise the U.S. price of its advanced driver assistant software.

Many technology and growth stocks tumbled in the first week of 2022 as investors began to recalibrate their portfolios to account for a more hawkish Federal Reserve, while the banking sector gained 9.4% last week as Treasury yields rallied on rate hike expectations.

Investors await inflation data this week for cues on consumer and producer prices, and whether it will sway the trajectory of the U.S. central bank's interest rate hikes expected to begin this year.

Markets are expecting a greater than 70% chance of an interest rate rise to 0.25% in March and at least two more hikes by year end.

Goldman Sachs (GS), on the other hand, expects the Fed to raise rates four times in 2022, compared to its previous forecast of three.

At 6:53 a.m. ET, Dow e-minis were up 1 points, or 0%, S&P 500 e-minis were down 5 points, or 0.11%, and Nasdaq 100 e-minis were down 49.75 points, or 0.32%.

Sportswear giant Nike fell 1.4% after HSBC downgraded the stock to "hold" along with peer Adidas due to persistent supply chain issues. (Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Maju Samuel)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.