US stock index futures fluctuated early Wednesday morning after the Dow closed at a record high the day before.
Futures contracts linked to the Dow Jones Industrial Average and the S&P 500 lost around 0.1%. Nasdaq 100 Futures Down 0.2%
Verizon was among the top winners in premarket trading after Warren Buffett’s Berkshire Hathaway announced a significant stake in the telecommunications giant. Shares rose 4% in premarket trading after the latest filing revealed that Berkshire bought more than $ 8 billion worth of shares in the fourth quarter, making Verizon one of the conglomerate’s six largest holdings.
Chevron stock was up 3% in premarket trading as filings showed that Berkshire also had a large stake in the energy company last quarter.
The subdued trading comes after the Dow closed at a record high during Tuesday’s regular trading session, the eighth record high of the 30-share average this year. The index also hit an all-time high during the day, driven by the strength of Salesforce stocks. The S&P 500 fell 0.06% during a volatile trading session while the Nasdaq Composite fell 0.34%. Apple had the biggest negative impact on the tech-heavy index, down 1.6%.
“If you look at historical norms, valuations are stretched. But we’ve never seen the long bond at 1.3% and we’re in uncharted waters here, so higher P / E ratios are warranted by lower interest rates,” said Scott Black. Founder and President of Delphi Management. “The other thing is that the Fed is going to be very accommodative … it’s going to keep interest rates low, and so you have the wind on your back.”
Meanwhile, the 10-year government bond yield was 1.30% on Tuesday, a level last hit in February 2020. The 30-year rate also reached its highest level in a year. Some on Wall Street believe that higher interest rates could encourage investors to switch from stocks to bonds while putting pressure on areas of the market, including technology, that have benefited from the low interest rate environment.
However, others, including LPL Financial’s Jeff Buchbinder, believe these fears may be exaggerated.
“Our preference for stocks over bonds – backed by low interest rates – is one of our most convincing recommendations for 2021,” said the equity strategist. “Several segments of the equity market – particularly the energy sector and banking – offer higher returns than traditional high quality bonds and offer attractive capital appreciation potential as interest rates rise,” he added.
In terms of earnings, Hilton will release quarterly results on Wednesday before the market opens, while Owens Corning, Wingstop, Analog Devices and Nabors will be among the names after the closing bell.
Investors will also get a feel for the ongoing economic recovery when January retail sales are released at 8:30 a.m. ET on Wednesday. Economists polled by Dow Jones expect sales to increase by 1.2% for the month after an unexpected drop of 0.7% in December.
Elsewhere in the market, bitcoin briefly surpassed $ 50,000 for the first time on Tuesday as the surge to new record highs continued.
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