Technology companies led stocks lower on Wall Street as another rise in bond yields rattled investors.

The S&P 500 fell 1.3 per cent on Wednesday (US time), and the tech-heavy Nasdaq dropped 2.7 per cent. The Dow Jones slid by 0.4 per cent. It sets up the Australian sharemarket to fall, with futures at 7.59am AEDT pointing to a drop of 38 points, or 0.6 per cent, at the open.

When bond yields rise quickly, as they have in recent weeks, that forces Wall Street to rethink the value of stocks, making each dollar of profit that companies earn a little less valuable. Technology stocks are most vulnerable to this reassessment, in large part because their recent dominance left them looking even pricier than the rest of the market.

On the flipside, banks benefit when bond yields rise, because it allows them to charge higher rates on mortgages and many other kinds of loans. Financial sector stocks were bucking the broader market slide. JPMorgan Chase, Bank of America and Wells Fargo were up more than 2 per cent.

“The good news to remember is there are other groups taking the baton,” said Ryan Detrick, chief investment strategist for LPL Financial, referring to banks and energy companies benefiting from higher rates, even as tech stocks take a hit.

The Dow Jones Industrial Average wavered between small gains and losses. The technology-heavy Nasdaq was down 2.4 per cent.

Wall Street continues to look to Washington, where economic data, comments out of the Federal Reserve and President Joe Biden’s stimulus package remain front and centre. Treasury yields hit the psychologically important 1.50 per cent mark last week as investors braced for stronger economic growth but also a possible increase in inflation.

“Some higher inflation at the beginning of a new economic expansion is perfectly normal,” Detrick said.