Nasdaq Futures Signal Drop as $1 Trillion Erased Since Netflix

(Bloomberg) — U.S. equity index futures signaled further losses on Monday as investors fretted over monetary tightening and risks from China’s Covid-19 lockdowns, while technology stocks remained under pressure from higher bond yields ahead of a big week for earnings.

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S&P 500 Index futures were 0.7% lower, while Nasdaq 100 contracts retreated 0.6% by 5:51 a.m. in New York, paring earlier declines of as much as 1.2%. The Nasdaq 100 Index has erased about $1 trillion in market value since Netflix Inc. released disappointing earnings and the gauge is closing in on oversold levels.

U.S. stocks closed at their lowest levels in more than a month on Friday as fears over a more aggressive Federal Reserve tightening cycle led to broad-based selling. Investors are entering another busy week for big technology companies’ earnings, with Alphabet Inc., Microsoft Corp., Meta Platforms Inc., Paypal Inc. and Apple Inc. all reporting results.

On Friday, Federal Reserve Chair Jerome Powell’s endorsement of aggressive actions to curb inflation sent traders racing to price in half-percentage-point interest-rate increases at the bank’s next four meetings, anticipating a stark break with its decades-long practice of tightening monetary policy at a gradual pace.

“Our view is that the market may have now priced in too great an extent of Fed tightening this year,” said UBS Wealth Management chief investment officer Mark Haefele. “A month ago, the Fed’s dot plot pointed to a year-end federal funds rate of 1.9%, the market now expects that level to be reached in July and fed funds to end the year at 2.83%.”

Twitter Inc. shares rose slightly in premarket trading after a report that Elon Musk met with the social media platform’s executives on Sunday as the company turns more receptive toward the billionaire’s $43 billion takeover offer.

In Europe, the Stoxx Europe 600 Index fell 1.9%, with the positives from Emmanuel Macron’s victory in the French presidential election outweighed by macro fears. Miners and energy were the biggest declining sectors as commodities slumped.

Global investors were also spooked by fears of a wider lockdown in Beijing amid the government’s steadfast adherence to its Covid-zero policy, while deteriorating economic outlook from the Shanghai restrictions is denting sentiment.

READ: Pinduoduo, Alibaba Lead Chinese ADR Decline Amid Lockdown Woes

U.S.-listed Chinese stocks declined, with Pinduoduo Inc. leading a drop in American depositary receipts, down 4.1% in premarket trade. E-commerce peers Alibaba Group Holding Ltd. fell 3.5% and JD.com Inc. lost 2.5%. Electric carmakers including Nio Inc. and Li Auto Inc.also fell. The weakness tracks a 4.9% slump in China’s CSI 300 Index, which closed at its lowest level in two years.