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U.S. stock indexes traded lower Thursday morning as investors reacted to disappointing results from big-box retailer Walmart Inc., and parsed a weaker-than-expected update on the state of the U.S. labor market amid the COVID pandemic.
Successful vaccine rollouts, good quarterly results from corporations, and hope of a better economy in the second half of 2021 has helped to lift stocks but equity investors were finding fewer reasons to drive stocks higher as bond yields also staged a steady ascent, indicating higher borrowing costs for individuals and corporations.
How are stock benchmarks performing?
- Futures for the Dow Jones Industrial Average YM00, -0.69% YMH21, -0.69% wre off 188 points, or 0.6%, to reach 31,362.
- S&P 500 index futures ESH21, -0.76% ES00, -0.76% declined 27 points, or 0.7%, at 3,901.
- Nasdaq-100 futures NQ00, -1.05% NQH21, -1.05% give up 136.25 points to 13,563.75, a drop of 1%.
On Wednesday, the Dow DJIA, -0.76% booked its third straight record close but the S&P 500 SPX, -0.87% and the Nasdaq Composite COMP, -1.21% indexes finished in negative territory.
What’s driving the market?
Market participants were digesting some signs of weakness in the overall economic recovery, after weekly jobless claims came in at 861,000, marking the highest level in a month and reading of manufacturing activity also fell short of expectations.
Economists surveyed by Econoday had expected 768,000 new jobless benefit claims for the week ended Feb. 13, down from 793,000, amid receding cases of COVID-19 in parts of the country and the rollout of vaccines. State continuing jobless claims drop 64,000 to 4.49 million.
“The jobless claims data continue to paint a bleak labor market picture with 1.38 million new claims for jobless benefits last week, the highest tally since early December,” wrote Lydia Boussour, lead U.S. economist and Gregory Daco, chief U.S. economist at Oxford Economics, in a Thursday note.
“The latest jobless claims data are consistent with the downbeat message from labor market indicators at the start of the year,” the economists wrote.
Meanwhile, a reading of manufacturing activity in the Federal Reserve’s Philadelphia region, the Philly Fed Manufacturing Index, fell to 23.1 in February from 26.5 in prior month.
Any reading above zero indicates improving conditions. Economists polled by The Wall Street Journal had expected a 19.2 reading. Any reading above zero indicates expansion in the manufacturing sector.
Colin Cieszynski, chief market strategist, at SIA Wealth Management said that disappointing in the data also was compounded by weaker than expected results from Walmart early Thursday.
“Walmart, the world’s largest retailer, posted disappointing results, suggesting that the strong January for US retail sales reported yesterday may not have been enough to offset November-December weakness,” he said in a daily research note.
The data come against the backdrop of declining cases of coronavirus in the U.S., with the nation averaging 77,661 new cases a day in the past week, down 43% from the average two weeks ago, and so far 57.4 million Americans have been vaccinated or 17% of the population, at a rate of 1.61 million doses a day, according to data aggregated by Johns Hopkins University.
Thus far, the U.S. economy has been showing signs of steady, if not rapid, improvement, underscored by retail sales figures, which showed a seasonally adjusted rise of 5.3% in January from a month earlier, while data on manufacturing output has been nearing its best levels in a year.
Market participants have pointed to progress on more fiscal stimulus from Congress as one cause for optimism for stock buying on Wall Street. Washington lawmakers are still negotiating the terms of the president’s $1.9 trillion COVID aid package. The Biden administration is also next month is expected to release a plan to outline his “Build Back Better” agenda that will focus heavily on infrastructure. On Wednesday, President Joe Biden laid out some elements of his plans to labor leaders.
Bets that the economy will eventually improve sometime this year has resurrected fears of a rapid rise in inflation, pushing government bond yields higher, with the 10-year Treasury note hanging around 1.3%, around its loftiest level in over a year.
Meanwhile, investors were keeping one eye trained on brutal winter conditions that is causing millions of Americans to remain without power in places like Texas, as winter storms buffet much of the U.S. The weather has delivered a jolt to natural-gas prices and pushed crude-oil values to their highest levels in more than a year.
Separately, the House Financial Services Committee at noon Thursday is set to grill several of the principal actors in the GameStop saga following public outcry against online trading platform Robinhood and other brokers’ decisions to briefly restrict trading in stocks including GameStop Corp. GME, +2.30%, and AMC Entertaintment Holdings AMC, +5.39%.
In other economic reports, a report on housing showed that building permits rose 10.4% in January to 1.88 million annual rate, while housing starts fell 6% last month to 1.58 million annual rate. And a reading of trade showed that U.S. import prices jumped 1.4% in January, marking the biggest increase since 2012.
Which stocks are in focus?
- Walmart Inc. WMT, -5.88% approved a $20 million buyback program and raised its dividend by 4 cents to $2.20 a share on Thursday as it delivered its quarterly results . Shares were down 5.7%.
- Marriott International Inc. shares MAR slid 1.5% Thursday, after the hotel operator posted a loss and weaker-than-expected revenue for the fourth quarter as the coronavirus pandemic kept travelers away.
- Rigel Pharmaceuticals Inc. shares RIGL rose by about 15% Thursday, after the company said it has agreed to join with Eli Lilly and Co. LLY, -1.23% in developing RIPK1 Inhibitors to treat immunological and neurodegenerative diseases.
- Shares of Hormel Foods Corp. HRL were off 0.3% Thursday, after the parent of food brands including SPAM, SKIPPY, Hormel deli meats and chili and Applegate reported fiscal first-quarter results that topped expectations.
- Shares of Barrick Gold Corp. GOLD gained 0.5%, to bounce off the previous session’s 10-month closing low, after the gold miner reported fourth-quarter profit and revenue that beat expectations.
How are other assets performing?
- The yield on the 10-year Treasury note TMUBMUSD10Y edged up to around 1.31% on Thursday.
- The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was off 0.3%.
- Oil futures edged higher as energy disruptions continued throughout the country, with the U.S. benchmark CL.1 up 0.6% to trade at $61.51 a barrel.
- Gold futures GC00 bounced back after a 1.5% skid to trade 0.4% higher at settle at $1,780.10 an ounce, after a death cross formed in the asset’s chart pattern.
- The pan-European Stoxx 600 index SXXP was trading 0.5% lower and London’s FTSE 100 stock index UKX tumbled 1.3%.
- Markets in Hong Kong HSI closed 1.6% lower, while Japan’s Nikkei 225 index NIK shed 0.2%. China’s Shanghai Composite Index SHCOMP, +0.55% finished up 0.6%, while the CSI 300 000300, -0.68% closed down 0.7%.
