Nasdaq plunges 1.3% as stock market crashes amid spike in bond yields and inflation

US stocks were lower on Wednesday morning, but mostly remained below previous lows, after economic reports pointed to a healthy economy in both the consumer and manufacturing sectors, but they also suggested that inflation could be moving faster than investors expected, pushing up bond yields.

How are the stock comparisons performing?
  • The Dow Jones Industrial Average DJIA,
    it was 60 points lower, close to 31,463, a decrease of 0.2%.

  • The S&P 500 SPX Index,
    it fell 23 points to 3,910, 0.6% less.

  • The Nasdaq Composite COMP,
    it fell 182 points, or 1.3%, to trade near 13,874.

On Tuesday, the Dow Jones closed at a record, but the S&P 500 and Nasdaq Composite indices broke a series of two-day gains to end lower.

What drives the market?

US retail sales figures for January offered the latest reading on consumer health amid the coronavirus pandemic, with crushing sales estimates and a 5.3% increase for the month, after a decline from 1% in December as COVID cases rose. But US producer prices rose 1.7% last year from 0.8% the previous month.

A separate report on industrial production from the Federal Reserve showed a 0.9% rise in January, also defeating economists’ forecasts for a 0.5% rise. Businesses restocked their inventories more than expected in December, but a reading on homebuilder sentiment was stronger than expected.

However, the producer price index rose 1.3% in January, the biggest increase since the index underwent a major revision in 2009 and prices for services were included in the report. The wholesale inflation rate in the past 12 months rose to 1.7% from 0.8% at the end of 2020, not far from the pre-pandemic level of 2%.

The data is helping to boost US bond yields as investors also look to the prospect of increased fiscal stimulus from Congress and declining coronavirus cases. On Tuesday, the Treasury note of 10 TMUBMUSD10Y,
reached a yield close to 1.30%, its highest level since February 26, according to Dow Jones Market Data.

“The retail sales figures were impressive and the PPI was also very strong, but we had a series of lows months before that,” said Peter Andersen, founder of Boston-based Andersen Capital Management. “It is too difficult to extrapolate based on a month. It could show pent-up demand, but the supply demand dynamics right now is still too difficult to filter out. I think it could show what the pent-up demand is once we get past the vaccine rollout. We’re going to the races. “

In an interview with MarketWatch, Andersen described himself as “really shocked by the attention investors are paying to shiny items like Bitcoin, space exploration, SPAC.” The market could use a little direction for more news on the vaccine’s progress, he said, but overall, aside from a few foamy areas, it’s not worrisome.

“Markets are showing small losses today as mild concerns about rising government bond yields have encouraged some traders to trim their exposure to equities,” said David Madden, Market Analyst at CMC Markets UK .

“Recently, the mood in global equity markets has been very optimistic as multi-year highs and in some cases all-time highs were set,” Madden wrote. “The purchase was fueled by hopes of higher stimulus spending by the Biden government, and also swayed the view that successful vaccine launches should help reopen economies and, in turn, economic activity will increase further. ahead this year, ”Referring to President Joe Biden’s $ 1.9 billion COVID relief proposal.

Meanwhile, frigid weather is posing problems across much of the U.S., including Texas, leaving millions without power and nearly 75% of the lower 48 states under a layer of snow, The Wall Street Journal wrote, citing the National Snow Analysis of the National Oceanic and Atmospheric Administration. report. The freezing weather reduced US oil production and helped boost prices.

In other economic reports, investors will keep an eye out for the minutes of the January Federal Reserve policy meeting to be released at 2 p.m. and more clues on how the central bank will react to the economic improvement thanks to higher fiscal spending and the implementation of effective vaccines.

Among the Fed speakers available today, Richmond Federal Reserve Bank Chairman Thomas Barkin was due to speak at 9 a.m., Boston Fed Chairman Eric Rosengren is said to speak an hour later and Dallas Fed Chairman Robert Kaplan will speak later on Wednesday after 6pm.

Watch: The flight from the big cities caused a dizzying rise in housing prices in the suburbs. Will it last longer than the pandemic?

What actions are in focus?
  • Actions of Verizon Communications Inc. VZ rose 3.7%, and Chevron Corp. CVX rallied 3.2% to set the pace for the Dow after Warren Buffett’s Berkshire Hathaway Inc. BRK.B revealed that it acquired large stakes in companies during the fourth quarter.

  • Canadian cannabis company Sundial Growers Inc. SNDL filed a shelf registration with the Securities and Exchange Commission to issue up to $ 1 billion in securities over time. The shares fell more than 15% in early trading.

  • Medical device manufacturer Medtronic PLC MDT said Wednesday that it is voluntarily recalling the unused Valiant Navion thoracic stent graft system and advising physicians to stop using the device immediately until further notice. The shares fell 1.4%.

  • LP energy transfer ET announced on Wednesday an agreement to buy Enable Midstream Partners LP ENBL in a stock transaction valued at $ 7.2 billion.

  • Actions of Hilton Worldwide Holdings Inc. The HLT fell 1.1% on Wednesday, after the hotel operator reported a surprising loss in the fourth quarter and revenues that fell more than expected, as the increase in COVID-19 cases and the tightening of travel restrictions interrupted the positive momentum seen in the summer and fall.

  • Shopify Inc.
    shares fell 5.7% despite better-than-expected quarterly results.

What are other assets doing?
  • The yield of the 10-year Treasury note TMUBMUSD10Y,
    it fell almost 3 basis points to 1.289%. Yields and bond prices move in opposite directions.

  • The ICE US dollar DXY index, a measure of the currency against a basket of six major rivals, was up 0.5%.

  • Oil futures rose as power disruptions continued across the country, with the US benchmark CL.1,
    + 0.40%
    it rose 0.2% to $ 60.20 a barrel, beating the key level of $ 60. GC00 gold futures,
    it plunged 1.2% to around $ 1,778.20 as bond yields rose.

  • The pan-European Stoxx 600 SXXP index fell 0.4% and the London FTSE 100 index, UKX, fell 0.2%.

  • Markets in Hong Kong HSI,
    + 1.10%
    it closed 1.1% higher, while Japan’s Nikkei 225 NIK Index lost 0.6%.

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