Tech stocks set for more losses after Nasdaq sinks

Futures for the technology-heavy Nasdaq-100 edged down 0.3% Thursday. On Wednesday, the Nasdaq Composite Index posted its biggest daily loss since February after minutes of the Federal Reserve’s most recent meeting showed officials eyeing a faster timetable for raising rates. Futures for the broad-market S&P 500 ticked up 0.1%, while contracts for the Dow Jones Industrial Average rose 0.2%.

Bank stocks got a boost from rising bond yields in premarket trading. Bank of America, Wells Fargo and JPMorgan Chase rose 1.5% or more ahead of the bell. Walgreens Boots Alliance gained 2.3% after quarterly earnings trumped analyst forecasts.

Treasury yields were on track to rise for a fourth consecutive day, reflecting investors’ conviction that the fast-spreading Omicron variant won’t stop the Fed tightening monetary policy to tame inflation. The yield on 10-year Treasury notes rose to 1.736% Thursday from 1.703% Wednesday.

Global markets followed Wall Street lower. Tech stocks retreated in Europe, helping to pull the Stoxx Europe 600 down 1.1%. Japan’s Nikkei 225 lost 2.9% and China’s Shanghai Composite Index fell 0.3%. Dutch chip maker ASML Holding fell 2.7% and German software firm SAP lost 3.1%, while luxury goods firms Hermes International and LVMH Moët Hennessy Louis Vuitton declined more than 3% apiece.

Traders will parse weekly data on the number of jobless claims and the U.S. trade balance at 8:30 a.m. ET, followed by the Institute for Supply Management’s gauge of activity outside the manufacturing sector at 10 a.m. The trade balance is expected to have widened to an estimated $72.6 billion in November.

Investors are bracing for a volatile spell for tech stocks, which have powered the market higher since the early-pandemic slump in 2020. Shares of companies such as Apple and Microsoft have benefited from low interest rates on top of blockbuster earnings helped by the shift to home working.

Rates, however, look set to increase, potentially as soon as March. Although investors say stocks can continue to rise in a period of rising rates that reflect a growing economy, tech shares and momentum stocks such as Tesla are seen as vulnerable.

“We could be in for a rough ride,” said Lars Skovgaard Andersen, investment strategist at Danske Bank Wealth Management. Mr. Andersen expects the volatility to last at least until tech companies begin to report earnings later this month, which he said could encourage investors to buy those stocks back.

Mr. Andersen sees the selloff as a buying opportunity but intends to target the broad market and European banks that stand to benefit when rates rise, rather than U.S. tech.

Cryptocurrencies have skidded in line with technology stocks, in a sign investors are cutting positions in more speculative markets. Bitcoin fell 2% to $42,778 Thursday, according to CoinDesk, compared with its value at 5 p.m. Wednesday.

The catalyst for the selloff was the publication of minutes from the Fed’s December policy meeting. They showed officials believed rising inflation and a tight labor market could call for lifting short-term rates “sooner or at a faster pace than participants had earlier anticipated.”

Some officials also thought the Fed should start shrinking its $8.76 trillion portfolio of bonds and other assets relatively soon after beginning to raise rates, the minutes said. Investors pushed yields on government bonds higher. In turn, that hurt tech stocks whose future cash flows are worth less in today’s terms when a higher discount rate is applied.

Traders in interest-rate futures are pricing in a 71% chance that the Fed will raise its short-term target rate from its range of 0% to 0.25% by the end of its March meeting. That is up from about 32% a month ago, shortly after Omicron emerged, according to CME Group data.

Commodity markets were mixed Thursday. Brent-crude futures, the benchmark in energy markets, rose 1.1% to $81.67 a barrel. Precious metals, which typically fall when interest rates rise, lost ground, with silver dropping 4% to $22.25 a troy ounce.