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Concerns about inflation were tempered on Wednesday by data showing just a 0.1% rise in core consumer prices last month, helping stocks rally and bond yields ease.
The Dow Jones Industrial Average finished above 32,000 points for the first time on Wednesday with gains continuing into Thursday, and bond yields are falling globally. And there is a good chance this period of calm in bonds will last, according to analyst Jani Ziedins of the popular CrackedMarket blog.
With stocks up again, investors need to watch technology stock favorites as bellwethers that the bull market will keep charging, said Ziedins in our call of the day.
According to Ziedins, the latest run-up in bond yields was likely triggered by “a contagious wave of herd selling” that got carried away.
“Now that the selling in the bond market is taking a break, there is a good chance this period of calm will persist,” Ziedins said. “Bonds holding these levels for several days suggest the worst could already be behind us.”
With stocks up, investors should watch the FAANG group — Facebook FB, +3.65%, Apple AAPL, +1.74%, Amazon AMZN, +2.18%, Netflix NFLX, +1.70%, and Google, owned by Alphabet GOOGL, +2.88% — which soared on Tuesday but faltered on Wednesday. Underperformance by Big Tech is “far and away” Ziedins’ biggest concern about the broad rally we have just seen.
“We cannot go higher without the best-of-the-best stocks leading the charge. If the FAANG stocks cannot get their act together, they threaten to take everything down with them,” Ziedins said.
But Ziedins said that if FAANG stocks manage to “show some life,” and keep it up, that could send indexes to record levels.
Tesla TSLA, +3.18% is another key stock to watch, according to Ziedins, and the shares retreating from their opening highs on Wednesday were “equally concerning” as the FAANG group stalling. While Ziedins said he doesn’t think Tesla’s behavior will impact the wider market, “it isn’t helpful” to see owners of Tesla shares sell the bounce this week instead of buying it.
Ziedins’ advice for investors is to keep holding for higher prices. As long as the S&P 500 index remains above 3,800 points, “the bull market is alive and well,” he said.
The buzz
Roblox RBLX, +3.60% stock soared 54% in its market debut on Wednesday, with an ARK fund snapping up a position worth more than $36 million. The videogames developer whose platform is popular with young teens is up again Thursday, with shares climbing 4%.
On the U.S. economic front, all eyes are on initial jobless claims. 712,000 Americans filed for unemployment last week, compared with 725,000 expected, marking a decline from 745,000 initial claims in the week prior. There were 4.14 million continuing jobless claims in the week of February 27. There were 6.9 million job openings in the month of January, outpacing expectations of 6.7 million.
The European Central Bank said it will accelerate the bond-buying program it launched in the early days of the pandemic, as the central bank faces rising bond yields that threaten to undermine its monetary policy.
Vir Biotechnology VIR, +31.72% stock jumped more than 30% after the company said its experimental COVID-19 treatment, developed with pharmaceutical GlaxoSmithKline GSK, -0.63%, significantly reduced hospitalization and death in high-risk adults.
Denmark, Norway, and Iceland have temporarily halted injections of the COVID-19 vaccine developed by AstraZeneca AZN, -2.52% and the University of Oxford to investigate several cases of blood clots in people who received the shot.
Goldman Sachs GS, +0.58% has pledged $10 billion over the next 10 years to advance racial equity and economic opportunity by investing in Black women. The investment banking giant will join with Black women-led organizations, financial institutions, and other partners to address gender and racial biases facing Black women.
American Airlines AAL, +1.86% has raised $10 billion through debt financing underpinned by the carrier’s loyalty program AAdvantage — estimated to be worth $20 billion.
The markets
Stock markets climbed further into the green DJIA, +0.99% SPX, +1.40%, poised to continue the momentum from Wednesday’s rally, with the tech-heavy Nasdaq COMP, +2.48% charging 2.5% higher by midday. Tech stocks and a positive reaction to the ECB meeting buoyed European indexes UKX, +0.17% DAX, +0.20% PX1, +0.72% while Asian equities NIK, +0.60% HSI, +1.65% SHCOMP, +2.36% finished the day higher across the board.
The charts
Our chart of the day, from Goldman Sachs, shows that the U.S. debt-to-gross domestic product will soon rise to the highest level in U.S. history. That ratio has long been the benchmark for fiscal sustainability.
But the investment bank pointed to a recent study — by Jason Furman and Lawrence Summers — arguing that there is a better way of measuring the debt burden. Instead, focus on the cost of servicing the debt as a share of GDP, shown in the two charts below. While debt levels are historically high, interest rates are historically low, so the cost of servicing the debt is at a more normal level.
Random reads
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