Wall Street to start mostly lower on Monday

After Friday’s euphoria in the US, Monday brings the comedown, as it often does.

Although the Dow Jones Industrial Average is expected to nudge 14 points higher to 31,510 the S&P 500 is expected to give back more than a quarter of Friday’s gains, opening 20 points lower at 3,842 while the tech-heavy Nasdaq 100 is staring at a 170 point slide to 12,499 when trading starts.

Rising bond yields and inflation fears are making US investors nervous.

“The reason why equities respond negatively to interest rates is because it pushes up the cost of capital,” explained Peter Garnry, the head of Equity Strategy at Saxo Group.

“Some of it is offset by rising growth expectations as rising interest rates do have a link to rising growth expectations. The overall impact is negative from rising interest rates and if inflation accelerates and stays above 3% for an extended time, the overall effect on equity returns gets increasingly worse. As a result, investors today do have to think hard about how the equity portfolio stands against inflation and how sensitive the portfolio is to rising interest rates,” Garnry suggested.

There is not much news on the macroeconomic front for US traders to get excited about and thus far not much in the way of corporate news flow, other than DuPont agreeing to buy Laird Performance Materials from private-equity outfit Advent International for a cool US$2.3bn in cash.

Four things to watch for on Monday:

• The week for the earnings diary will start with numbers from ContextLogic Inc (NASDAQ:WISH), the owner of e-commerce platform Wish, as well as personal styling services firm Stitch Fix Inc (NASDAQ:SFIX) and convenience store chain Casey’s General Stores Inc (NASDAQ:CASY)
• Shares in insurance firm Athene Holding Ltd (NYSE:ATH) will also be in focus following news it has agreed to a US$11bn takeover deal with private equity firm Apollo Global Management
• Oil prices may also get a look in as an attack on oil facilities in Saudi Arabia has helped pushed crude prices to just under US$70 a barrel
• On the macro front, the diary is relatively thin although some investors will be keeping an eye on US consumer inflation expectations for February

Story by ProactiveInvestors