Fed chair Jerome Powell is due to speak on Thursday Pool/Getty Images
Global stocks tumbled on Thursday after US equities dropped sharply the previous day, with rising bond yields causing investors to question the sky-high valuations of tech stocks in particular.
S&P 500 futures fell 0.3% after a sharp fall on Wednesday, while Dow Jones futures slipped 0.15%. Futures for the tech-heavy Nasdaq 100 index fell 0.43% as investors cooled on some of the market's flashiest names.
A rise in bond yields unnerved investors on Wednesday, causing the Nasdaq to tumble 2.7%, with Tesla dropping 4.8% and Amazon shedding 2.9%. The Nasdaq has soared more than 80% from its March lows, making some investors anxious.
The nerves spread to Asia overnight, with China's CSI 300 dropping 3.15% and Japan's Nikkei 225 falling 2.13%.
European stocks then opened lower, with the continent-wide Stoxx 600 down 0.64% in early trading and the UK's FTSE 100 off by 1.08%.
The catalyst for the stock-market jitters has been rising bond yields, with the yield on the US 10-year Treasury note touching 1.5% on Wednesday before easing. It had fallen 0.6 basis points to 1.464% on Thursday morning.
Ultra-low yields have supported the boom in equities - and tech stocks in particular - by driving investors towards fast-growing stocks that offer strong returns.
But higher yields are starting to make stocks look less attractive, while also raising borrowing costs and eroding the value of future earnings.
Yields have risen as traders have sold government bonds at a rapid rate, with yields moving inversely to prices.
Investors think growth and inflation will pick up sharply in 2021 which makes them demand higher returns on bonds. Some also think central banks could cut back on support for economies, pushing up yields.
The eyes of the market will therefore be on Federal Reserve governor Jerome Powell, who is due to talk at The Wall Street Journal jobs summit at 12.05 p.m. EST on Thursday.
"Markets will be looking for signals from Mr Powell regarding his comfort with rising bond yields, inflation, and any signs of potential changes in Fed guidance," said Jeffrey Halley, senior market analyst at currency firm Oanda. "He will have to choose his words very carefully."
Hussein Sayed, chief market strategist at trading platform FXTM, said: "With US inflation expectations over the next five years reaching a 13-year high and long term-borrowing costs on the rise, central banks face tough challenges comforting investors."
"Financial conditions are tightening despite the monetary policy being loose and policymakers clearly signaling no intention of raising interest rates anytime soon."
The dollar index climbed 0.27% on Thursday morning to 91.19, buoyed by rising bond yields.
In the oil markets, Brent crude fell 0.66% to $63.63 a barrel while WTI crude slipped 0.82% to $60.79 a barrel as OPEC+ producers prepared to meet to discuss output plans.
Bitcoin fell around 5% over a 24-hour period to $49,052 on Thursday morning.