Oil prices are rallying again

Dow futures fell on Tuesday as bond yields continued to rise while oil prices rose to a 7-year high and stoked inflation fears. Dow Jones futures were down 228 points, or 0.63%, and S&P 500 futures were down 1.01% at 5:40 am ET. Meanwhile, futures for the tech-heavy Nasdaq 100 index fell 1.63%. All recovered somewhat from the deeper falls in European trading. The moves suggest stocks could fall sharply as markets reopen later in the day after being closed Monday for the Martin Luther King Jr. holiday. Stocks have gotten off to a rocky start to the year as investors wait for the Federal Reserve to raise interest rates to cool soaring inflation. Traders expect the Fed to hike rates four times in 2022, by 25 basis points each.

Bond prices have fallen and yields have risen sharply as expectations of higher interest rates in the future are leading investors to seek higher yields. Those high bond yields have hurt tech stocks, and the Nasdaq 100 is down more than 5% so far this year. Companies whose full earnings potential lies far in the future appear less attractive when the so-called risk-free rate - the yield on government bonds - is higher. Yields on the key 10-year US Treasury bond rose 3.8 basis points to 1.83% in European trading on Tuesday, the highest since January 2020 from 1.854% previously. "We think it's going to be another challenging year for fixed income investors," Hugh Gimber, market strategist at JPMorgan Asset Management, told Insider. "I think another year of negative global government bond yields is quite possible." Gimber said tech stocks are likely to remain under pressure as higher bond yields, strong growth and rising inflation send investors elsewhere.

"We think leadership in equities will be more cyclical," he said. "You will see stronger returns from value sectors like banks and energy. It's likely that we'll see very different equity market leadership than we've seen in the past decade."

European stocks fell in early trading Tuesday, with the continent's Stoxx 600 down 1.29% and London's FTSE 100 down 0.85%. Asian equities were mixed overnight, with China's CSI 300 up 0.97% and Tokyo's Nikkei 225 falling 0.27%. Expectations of strong economic growth helped push oil prices to a seven-year high, while a Houti rebel attack on a key producer in the UAE also weighed. According to analysts, the rising prices contributed to fears of inflation on the stock exchanges.

WTI crude, the US benchmark, rose 1.87% to $85.37 a barrel. International benchmark Brent rose 1.36% to $87.66 a barrel. Both traded at their highest since autumn 2014. "Supply constraints combined with strong demand are supporting the uptrend, with $90 as the next key technical resistance to watch for," said Victoria Scholar, head of investment at trading platform Interactive Investor. Earnings season should resume on Tuesday, with investors hoping the better-than-expected results can give shares a boost after a weak start to 2022. Goldman Sachs, Morgan Stanley and Netflix are among the companies reporting this week. Elsewhere, bitcoin continued to struggle, with crypto markets hit by the same risk aversion that weighed on tech stocks. The token fell 2.7% to $41,684 on Tuesday, according to Bitstamp data, well below the record high of nearly $69,000 set in November.