Wall St strives to bounce back from worst week in two years

US stock index futures held on to gains of more than 1 per cent as Wall Street attempts to bounce back from its worst week in two years, while volatility remains relatively elevated and US bond yields hit a new four-year high, reports Reuters.
By 8:26 a.m. ET (1326 GMT), Dow e-minis were up 288 points, S&P 500 e-minis were up 30 points, Nasdaq 100 e-minis were up 69 points. The benchmark S&P 500 index closed up 1.5 per cent on Friday, but still ended the week nearly 9 per cent below its all-time high on Jan. 26 as investors fretted that the specter of rising inflation would warrant increasing interest rates at a faster-than-expected pace.
"The futures are pointing to a solid bounce in attempt to resume Friday's climb, notwithstanding the 10-year US Treasury yield knocking on the 2.9 per cent level," Peter Cardillo, chief market economist at First Standard Financial in New York, wrote in a note.
US 10-year Treasury yields hit a new four-year high of 2.902. Wall Street's fear gauge, VIX, short for the CBOE Volatility index was last at 26.49, down from Friday's close of 29.06, but double its 50-day moving average.
"While today's bounce suggests a short-term oversold market condition is attracting buyers, one more final push to the downside is on the horizon as a 3-per cent 10-year TSY yield is still not fully discounted."
Equities for years have looked relatively attractive compared to the low yields offered by bonds, but the rise in Treasury yields has diminished the allure of stocks, especially with stock valuations at historically expensive levels.
A narrowing spread between bond yields and companies' earnings yields - currently at 5.4 per cent for the S&P 500 index prompts asset allocation changes between equities and fixed income. That, along with a reversal of bets on low volatility drew the three major US indexes to correction territory last week, measured by a 10 per cent decline from their record highs hit on January 26.