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U.S. stock-index futures were trading slightly higher early Friday, but stocks are likely to book a second straight weekly loss in a volatile stretch for Wall Street, framed by rising bond yields and concerns about the global recovery from the coronavirus pandemic.
How are stock benchmarks performing?
-
Futures for the Dow Jones Industrial Average
YM00,
+0.42% YMM21,
+0.42%
were up 116 points, or 0.4%, to reach 32,616. -
S&P 500 index futures
ES00,
+0.20% ESM21,
+0.20%
advanced 10.50 points, or 0.3%, to 3,910.75. -
Nasdaq-100 futures
NQ00,
-0.35% NQM21,
-0.35%
were off 7.50 points, or less than 0.1%, at 12,764.50.
On Thursday, the Dow
DJIA,
closed 199.42 points, or 0.6%, higher at 32,619.48, the S&P 500
SPX,
rose 20.38 points to end at 3,909.52, a rise of 0.5%, while the Nasdaq Composite
COMP,
closed at 12,977.68, up 15.79 points for a gain of 0.1%.
What’s driving the market?
Stocks have been mostly struggling for direction in recent weeks and analysts have largely attributed this latest bout of volatility to month-end and quarter-end rebalancing by large pensions funds.
The impetus for that action is the rise in bond yields on expectations that the economy may stage a more potent recovery and suffer higher inflation in the wake of the $1.9 trillion fiscal stimulus package from the Biden administration.
As a bull market in bonds comes into question, big investors who adhere to traditional stocks-to-bonds portfolio diversification theories of 60-40 are feeling compelled to buy more fixed income assets as yields rise.
Wall Street will get a key read of U.S. inflation and the health of the consumer later in the session, with data on personal income and consumer spending due at 8:30 a.m. Eastern.
Early Friday, the yield on the 10-year Treasury note yield
TMUBMUSD10Y,
after touching a nadir this week around 1.59%, was at around 1.67%, but still below its level last Friday at 1.729%.
A rise in coronavirus cases that has forestalled the business reopening plans for large parts of Europe also has been credited with creating headwinds for bullish investors.
Taken together those factors have helped create a bumpy rotation out of growth stocks that proved big winners during the pandemic and into those value shares that might perform better in an improving economy.
The S&P 500’s information stock sector is down 0.9% so far in March, while the utility sector
XLU,
is up nearly 9%, industrials
XLI,
have gained 7%, and consumer staples
XLP,
are up 6.5%, making those areas the best performers among the broad-market index’s 11 sectors.
One development that could be worth watching, the Federal Reserve said on Thursday that banks won’t be able to make payouts to shareholders in the form of dividends and buybacks until June 30, as long as the institutions meet regulatory requirements, including pass stress tests. The Fed imposed restrictions on such payments at the onset of the COVID crisis.
Looking ahead, investors will also be watching a report on wholesale inventories at 8:30 a.m. and a reading of consumer sentiment at 10 a.m.
Which companies are in focus?
- WeWork is set to take itself public in a $9 billion merger with a black-cheque company, according to a Wall Street Journal report. The office-sharing company will merge with BowX Acquistion Corp.
-
AMC Entertainment Holdings
AMC,
+21.29%
is up on Friday after a strong 21% rise on Thursday for the movie chain. -
Another so-called meme stock GameStop Corp.
GME,
+52.69%
was rising firmly in premarket trade Friday morning after a 53% jump on Thursday.
