Stocks fell Thursday morning, with equities looking to extend losses for a third consecutive day.
The Dow and S&P 500 each opened sharply lower. The Nasdaq added to losses after the index shed 2% on Wednesday amid another day of selling for technology shares. U.S. crude oil prices gave back some gains after spiking 5% on Wednesday, though a massive container blocking passage in the Suez Canal continued to plug the significant trade artery for another day, weighing on oil supplies.
The quick move lower in equities came following remarks from Federal Reserve Chair Jerome Powell, who spoke on NPR’s Morning Edition Thursday morning. Powell doubled down in his assertion that the Fed remained strongly committed to targeting 2% average inflation over time, and said that any eventual pullback in Fed support would be done “gradually over time, and with great transparency.”
However, some investors have been skeptical that the Fed will resist adjusting its monetary policy positioning in the face of higher inflation this year. Though Powell and other Federal Open Market Committee members have advocated a “patient” stance that favors leaving accommodative policies in place during the recovery, the specter of much greater-than-expected inflation this year remains on the table.
“This will be the first time that every country in the world is emerging from recession simultaneously. And the Fed and other policymakers are banking on this idea that it’ll be a relatively short strain on supply chains but eventually, things get up and running again and you can get the input components to where they’re most needed,” Tim Quinlan, Wells Fargo senior economist, told Yahoo Finance. “But I think one of the under-appreciated risks is the scope for this to create more of an inflation shock in the short-run than they’re banking on right now.”
The benchmark 10-year yield fell back below 1.6%, bringing it more than 15 basis points lower from last week’s high. Still, yields remain sharply higher for the year-to-date, as concerns over rising inflation linger for many investors.
“We think long-term bond yields are just in a pit stop here in what’s going to be a multi-year move higher,” JPMorgan global market strategist Gabriela Santos told Yahoo Finance.
“Ultimately, we do continue to think that it will harm the more speculative or expensive parts of the market like tech and really benefit the more cyclical [sectors] and especially the parts of the market that can benefit from a steepening yield curve,” she added.
With just a week left of the first quarter of 2021, the stocks that had been the most badly beaten down last year have so far largely outperformed. Cyclical sectors like financials, industrials and energy gained as prospects of rising interest rates, increased spending on infrastructure and demand for travel picked up.
However, the past week’s choppiness in equity market trading – as well as lingering virus-related headline risks to cyclicals stocks like cruise lines – has underscored the non-linear nature of the recovery for both the economy and for last year’s laggards.
“It’s not just as easy as flipping the calendar to 2021,” Brian Belski, BMO Capital Markets chief investment strategist, told Yahoo Finance. “We think this is going to be well into 2022 before we’re in elevators again … or getting on an airplane period more regularly. And that’s why you need exposure to the stay-at-home stocks, to the tech stocks …You have to be diversified, you have to be an active stock picker and you have to be fundamental, much more fundamental, less macro.”
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9:47 a.m. ET: BofA sees ‘remarkable gain’ in credit card spending after stimulus checks
U.S. consumers are already rapidly picking up on spending after receiving their $1,400 stimulus checks, according to new data from Bank of America.
“BAC aggregated credit and debit card spending showed a remarkable gain in consumer activity – total card spending was up 45% over a 1-year period and 23% over a 2-year period for the 7-days ending March 20,” Bank of America economist Michelle Meyer wrote in a note Thursday. “The 1-year change is impacted by the sharp contraction in spending this time last year due to COVID-related lockdowns, putting an emphasis on the 2-year change. The strong gain in spending over the recent period reflects the latest $1.9tr stimulus: according to Treasury, $325bn of Economic Impact Payments have been distributed.”
The firm also noted that the greatest increase in spending came among its “lowest income cohort” making less than $50,000 per year. For these consumers, “spending was up a staggering 69% over a 2-year period for stimulus recipients as compared to 16% for non-recipients.”
“The differential was much smaller for the highest income cohort where spending was up 29% vs 7% for non-stimulus recipients,” the firm added.
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9:31 a.m. ET: Stocks open lower, Dow drops 100+ points, or 0.4%
Here’s where markets were trading shortly after the opening bell on Thursday:
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S&P 500 (^GSPC): -17.8 points (-0.46%) to 3,871.34
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Dow (^DJI): -139.03 points (-0.43%) to 32,281.03
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Nasdaq (^IXIC): -102.87 points (-0.79%) to 12,860.5
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Crude (CL=F): -$2.00 (-3.27%) to $59.18 a barrel
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Gold (GC=F): +$0.70 (+0.04%) to $1,733.90 per ounce
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10-year Treasury (^TNX): -1.6 bps to yield 1.598%
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9:24 a.m. ET: 4Q GDP revised up to 4.3% as private inventory investment came in higher
U.S. gross domestic product increased at a 4.3% quarter-over-quarter, annualized rate in the final three months of 2020, according to the Bureau of Economic Analysis’ final revision of fourth-quarter GDP.
The upward revision to headline GDP came as private inventory investment was shown to have come in stronger than previously reported. This was partially offset by a downward revision to non-residential fixed investment, the BEA added.
The quarter-over-quarter increase in personal consumption, which accounts for more than two-thirds of domestic economic activity, edged down slightly to 2.3%, from the 2.4% previously reported.
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8:50 a.m. ET: New weekly jobless claims fell to a fresh pandemic-era low last week
Initial unemployment claims dipped more than expected last week, reaching the lowest level since mid-March 2020 as the labor market continued to make strides in recovering.
New filings totaled 684,000 during the week ended March 20, following an upwardly revised 730,000 during the prior week. Continuing claims also fell to a new virus-era low of 3.870 million.
But while claims have come down considerably from those highs, they remain sharply elevated from 2019 levels, when new claims averaged just over 200,000 per week. New claims are also still above their high from the Global Financial Crisis, when weekly claims peaked at 665,000.
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7:55 a.m. ET: Stock futures erase earlier gains
Contracts on the three major indexes turned lower, with about an hour and a half to go until the opening bell.
Dow futures shed 80 points, or 0.2%, as shares of Nike (NKE) dropped by more than 5%. Contracts on the S&P 500 dipped by 0.2%, and Nasdaq futures also traded lower by 0.2%. Shares of Nike,
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7:18 a.m. ET Thursday: Stock futures rise, holding onto overnight gains
Here’s where markets were trading heading into the opening bell on Thursday:
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S&P 500 futures (ES=F): 3,888.5, up 7.75 points or 0.2%
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Dow futures (YM=F): 32,373.00, up 54 points or 0.17%
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Nasdaq futures (NQ=F): 12,832.75, up 38.75 points or 0.3%
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Crude (CL=F): -$0.94 (-1.54%) to $60.24 a barrel
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Gold (GC=F): -$2.50 (-0.14%) to $1,730.70 per ounce
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10-year Treasury (^TNX): -0.4 bps to yield 1.61%
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6:06 p.m. ET Wednesday: Stock futures open slightly higher
Here’s where markets were trading as the overnight session kicked off on Wednesday:
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S&P 500 futures (ES=F): 3,884.25, up 3.5 points or 0.09%
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Dow futures (YM=F): 32,351.00, up 32 points or 0.1%
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Nasdaq futures (NQ=F): 12,803.5, up 9.5 points or 0.07%
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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