Stock futures declined in early trading on Monday after the S&P 500 posted its first losing week in three.
Futures on the Dow Jones Industrial Average pointed to an opening drop of about 160 points. S&P 500 futures lost 0.6% and Nasdaq 100 futures fell 1.1%.
The move in futures came after the S&P 500 and the Nasdaq Composite snapped a two-week winning streak with a loss of 0.7% and 1.6%, respectively, last week. The blue-chip Dow eked out a 0.1% gain in the same period, supported by Caterpillar and JPMorgan.
Some equity investors grew concerned about rapidly rising bond yields in recent weeks as they could especially hurt high-growth companies reliant on easy borrowing while diminishing the relative appeal of stocks.
Tesla shares lost 3% in premarket trading following a 4% decline last week. Apple and Microsoft also fell in early trading.
The 10-year Treasury yield jumped 14 basis points last week to 1.34%, near its highest level since February 2020. The 10-year yield was up another 3 basis points on Monday to 1.37%. So far this month, the benchmark rate has moved up 28 basis points. A basis point is 0.01%.
"This move in yields should be something that investors keep a close eye on," Matt Maley, chief market strategist at Miller Tabak, said in a note. "Just because long-term rates are ultra-low on an historical basis, we do not believe that they will have to rise as far as most pundits think they do...before they impact the stock market."
All eyes will be on Federal Reserve Chairman Jerome Powell, who delivers his semi-annual testimony on the economy before the Senate Banking Committee on Tuesday. His comments on rates and inflation could determine the market direction for the week.
Meanwhile, many on Wall Street believe that the jump in bond yields reflects a sign of growing confidence in the economic recovery and stocks should be able to absorb higher rates amid strong earnings.
"We do not see the recent increase in yields as a threat to the bull market," Keith Lerner, chief market strategist at Truist, said in a note. "Given that we are in the early stages of an economic recovery, monetary and fiscal policy remains supportive, the sharp rebound in earnings, and favorable relative valuations, we maintain our overweight to equities."
The market is headed into the final week of February with solid gains. The Dow and the S&P 500 have risen more than 5% this month, while the Nasdaq has climbed 6.2%. The small-cap Russell 2000 outperformed with a 9.3% gain this month.
On the pandemic front, the White House said that it expects to ship out millions of delayed coronavirus vaccine doses this week after a sweeping winter storm disrupted logistics. Gov. Andrew Cuomo said on Sunday that a New York resident has tested positive for the Covid-19 variant first identified in South Africa.
Airline stocks rebounded after Deutsche Bank upgraded several of the shares. American Airlines gained 6% in premarket trading.
Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.