US stocks traded lower on Wednesday morning, but most fell from previous lows, after economic reports pointed to a healthy economy in both the consumer and manufacturing sectors, but also suggested that inflation could shake faster than investors had expected, which boosted bond yields.
How do stock benchmarks work?
-
The Dow Jones Industrial Average DJIA,
-0.15%
it was 60 points lower, close to 31,463, with a fall of 0.2%. -
The S&P 500 SPX Index,
-0.51%
fell 23 points to 3,910, down 0.6%. -
The Nasdaq Composite COMP,
-1.19%
fell 182 points, or 1.3%, to trade near 13,874.
On Tuesday, the Dow ended with a record, but the S&P 500 and Nasdaq Composite indices hit a two-day earnings chain to end the fall.
What is driving the market?
January U.S. retail sales figures provided the latest reading on consumer health amid the coronavirus pandemic, with sales estimates rising and rising 5.3% during the month, after a 1% decline in December as COVID cases increased. But prices to U.S. producers rose 1.7% last year from 0.8% the previous month.
A separate report on Federal Reserve industrial production showed a 0.9% rise in January, which also exceeded economists ’forecasts of a 0.5% gain. Businesses recovered their inventories more than expected in December, but the reading on home builders ’confidence was stronger than expected.
However, the producer price index jumped 1.3% in January, the largest increase since the index underwent a major overhaul in 2009 and service prices were included in the report. The wholesale inflation rate for the last twelve months rose to 1.7% from 0.8% at the end of 2020, not far from the pre-pandemic level of 2%.
The data helps boost U.S. bond yields, as investors also expect the possibility of more congressional fiscal stimulus and declining coronavirus cases. On Tuesday, the TMUBMUSD10Y treasury note,
reached a yield close to 1.30%, its highest level since Feb. 26, according to Dow Jones market data.
“Retail sales figures were impressive and the PPI was also very strong, but we’ve had a number of low months before,” said Peter Andersen, founder of Boston-based Andersen Capital Management. “It’s too difficult to extrapolate based on a month. It could show cumulative demand, but supply demand dynamics at the moment are still too difficult to filter. I am thinking that it could show what the accumulated demand is once the vaccine is implemented. We will go to the races ”.
In an interview with MarketWatch, Andersen said he was “really surprised by the attention investors are paying to brilliant items like Bitcoin, space exploration, SPAC.” The market could use a bit of direction to get more news on the progress of vaccines, he said, but overall, apart from some frothy areas, it’s not worrisome.
“Markets present small losses today as slight concerns about rising public bond yields have encouraged some traders to reduce their equity exposure,” said David Madden, market analyst at CMC Markets UK.
“Recently, the mood in global equity markets has been very bullish as multi-year highs were set and in some cases historic highs were set,” Madden wrote. “The purchase was being fueled by the hope of gaining more stimulus spending from the Biden government; there was also the view that successful vaccine deployment should help reopen economies and, in in turn, economic activity will increase by the end of this year, ”referring to President Joe Biden’s $ 1.9 trillion COVID grant proposal.
Meanwhile, the cold weather presents problems in much of the United States, including Texas, leaving millions without electricity and nearly 75 percent of the lower 48 states under snow, The Wall Street Journal wrote citing the National Snow Analysis of the National Oceanic and Atmospheric Administration report. The icy weather reduced U.S. oil production and helped raise prices.
In other economic reports, investors will watch the minutes of the January Federal Reserve political meeting to be released at 2 p.m. and clues as to how the central bank will react to the economic improvement thanks to higher fiscal spending and effective deployment of vaccines.
Today, among the Fed speakers, Richmond Federal Reserve Chairman Thomas Barkin was due to speak at 9 a.m., Boston Fed Chairman Eric Rosengren is said to be speaking an hour later and Dallas Fed Chairman Robert Kaplan will speak Wednesday after 6 p.m.
See: The great flight of the city caused an increase in the prices of suburban houses: will the pandemic last?
What actions are focused on?
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Actions of Verizon Communications Inc. VZ increased 3.7% i Chevron Corp. CLC rallied 3.2% to outperform the Dow after Berkshire Hathaway Inc. of Warren Buffett, BRK.B, revealed that it acquired large stakes in companies during the fourth quarter.
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Canadian cannabis company Sundial Growers Inc.. SNDL filed a bookshelf record with the Securities and Exchange Commission to issue up to $ 1 billion in securities over time. Shares fell more than 15% in early trading.
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Manufacturer of medical devices Medtronic PLC MDT said Wednesday it is voluntarily recalling the unused Valiant Navion chest stent graft system and informing doctors to immediately stop using the device until further notice. Shares fell 1.4%.
- Power transfer LP ET on Wednesday announced a deal to buy Activate Midstream Partners LP ENBL in a $ 7.2 billion stock market deal.
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Actions of Hilton Worldwide Holdings Inc. HLT fell 1.1% on Wednesday, after the hotel operator reported a surprise fourth-quarter loss and revenue that fell more than expected as the increase in COVID-19 and tightening of travel restrictions disrupted the positive momentum seen in summer and fall.
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Shopify Inc.
SHOP,
-7.65%
shares fell 5.7%, despite better-than-expected quarterly results.
What do other resources do?
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The performance of the 10-year Treasury note TMUBMUSD10Y,
1.281%
fell about 3 basis points to 1.289%. Bond yields and prices are moving in opposite directions. -
The ICE US Dollar DXY index, a measure of the currency against a basket of six major rivals, rose 0.5%.
-
Oil futures increased as energy disruptions continued across the country, with the US benchmark CL.1,
+ 0.52%
rose 0.2% to $ 60.20 a barrel, surpassing the key level of $ 60. GC00 Gold Futures,
-1.50%
it fell 1.2% to $ 1,778.20 as bond yields rose. -
The pan-European Stoxx 600 SXXP index fell 0.4% and London’s FTSE 100 stock index, UKX, fell 0.2%.
-
Markets in Hong Kong HSI,
+ 1.10%
closed 1.1% higher, while the Japanese Nikkei 225 NIK index fell 0.6%.
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