Stock futures dipped Tuesday evening, holding lower following an extended rout in technology stocks. Investors also anxiously awaited a packed slate of economic data results out Wednesday before a holiday market closure. 

Rising interest rates coincided with a selloff in tech and growth stocks for a second day this week, with the Nasdaq dropping another 0.5% after Monday's more than 1% decline. The Dow held up strongly and added nearly 200 points, with energy and financials stocks outperforming. The 10-year Treasury yield rose to near 1.7%. 

"Initially, the markets were happy with the FOMC decision [for Fed Chair Jerome Powell's renomination] in the sense that it was sort of a continuity play to some degree. But then rates started to rise, and a lot of folks read rising rates as negative for big-cap tech," Stuart Kaiser, UBS head of equity derivatives research, told Yahoo Finance Live. "So I think the tradeoff we're going to have here is that, tech has been market leadership — it's obviously a strong earnings growth and free cash flow engine for U.S. equities — but if you believe it's going to come under pressure from higher yields, then you end up with kind of a difficult Catch-22."

Investors are set to receive a deluge of economic data on Wednesday ahead of the Thanksgiving Day market holiday, with both the U.S. stock and bond markets set to close all day Thursday. These reports will include weekly jobless claims, along with the second estimate of third-quarter U.S. GDP. And importantly, the Bureau of Economic Analysis will release the October personal consumption expenditures (PCE) deflator, offering an updated look at the extent of the price increases still reverberating through the U.S. economy. 

The headline PCE deflator is expected to rise by 5.1% in October over last year for its fastest annual growth rate in more than three decades. Taken in tandem with a bevy of other data pointing to persistently high inflation, investors are speculating that the Federal Reserve will step in and raise benchmark interest rates from their near-zero levels next year to try and stem rising prices. 

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According to other analysts, the market action this week — with a renewed rotation away from technology and growth stocks in the face of rising rates — could presage the investing environment for next year. 

"Today might be an example of what we see more of next year as the Fed moves into a mode of withdrawing liquidity from the markets and ending these pandemic-era policies, perhaps with rate hikes at the end of the year," Jeffrey Kleintop, Charles Schwab chief global investment strategist, told Yahoo Finance Live. "And that means higher-valuation stocks, well, they tend to not do as well in environments of rising interest rates and tighter financial conditions." 

"So you may want to look to be in those sectors that are maybe trading closer to their average valuations, looking to leadership like financials, energy," he added. "The only caveat to that is when we see these upticks in COVID cases globally, it tends to favor those lockdown defensives like technology." 

6:16 p.m. ET Tuesday: Stock futures open lower 

Here's where markets were trading Tuesday evening:

  • S&P 500 futures (ES=F): -4.75 points (-0.1%), to 4,683.75

  • Dow futures (YM=F): -27 points (-0.08%), to 35,739.00

  • Nasdaq futures (NQ=F): -17.25 points (-0.11%) to 16,294.75

NEW YORK, NEW YORK – NOVEMBER 15: A trader works on the floor of the New York Stock Exchange (NYSE) on November 15, 2021 in New York City. Following positive economic news out of China, stocks were up in morning trading on Monday with investors looking at retail sales and earnings results out from major U.S. companies later this week. (Photo by Spencer Platt/Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter

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