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U.S. stock index futures lost ground Wednesday, extending losses after a deluge of economic data in the run-up to the Thanksgiving holiday on Thursday.
What’s happening
-
Futures on the Dow Jones Industrial Average
YM00,
-0.53%
fell 193 points, or 0.5%, to 35,571. -
S&P 500 futures
ES00,
-0.53%
lost 26.50 points, or 0.6%, to 4,662. -
Futures on the Nasdaq 100
NQ00,
-0.73%
dropped 123 points, or 0.8%, to 16,189.
On Tuesday, the Dow Jones Industrial Average
DJIA,
rose 195 points, or 0.55%, to 35814, the S&P 500
SPX,
increased 8 points, or 0.17%, to 4691, while the Nasdaq Composite
COMP,
dropped 80 points, or 0.5%, to 15775.
What’s driving the market
One of the stories of the last few days has been the rise in real, or inflation-adjusted, yields. The 10-year yield on Treasury-inflated-protected securities closed above -1% for the first time in three weeks on Wednesday. That comes as Europe battles a wave of COVID cases, and as the market took a hawkish interpretation to the renomination of Jerome Powell to chair the Fed.
“I suspect they’ll stay negative for the rest of my career so while higher real yields are likely, I suspect that this is a trade rather than a structural long-term journey given likely long-term financial repression,” said Jim Reid, head of thematic research at Deutsche Bank.
See: Falling real yields are a key to the stock-market rally: What investors need to know
Investors were sifting through a pre-Thanksgiving data dump on Wednesday. First-time claims for unemployment benefits last week plunged by 71,000 to 199,000. Economists surveyed by The Wall Street Journal had estimated initial jobless claims would total a seasonally adjusted 260,000.
Orders for U.S. durable goods—products meant to last at least three years—fell 0.5% in October, the government said Wednesday. Economists polled by The Wall Street Journal had forecast a 0.3% increase. Yet the decline stemmed entirely from fewer orders for passenger planes, a volatile category that often distorts the level of underlying demand in the economy.
The U.S. trade deficit in goods narrowed 14.6% to $82.9 billion in October. The pace of growth in the third quarter was revised to a 2.1% annualized rate versus an initial estimate of 2%.
Still to come at 10 a.m. Eastern are readings on personal savings and spending, including the Federal Reserve’s favorite inflation indicators, as well as the latest readings on new-home sales and the University of Michigan’s consumer sentiment index. Minutes of the Fed’s November meeting are due at 2 p.m.
Michael Kramer of Mott Capital Management said in a blog post that he expects the Fed minutes to show the option of a faster taper being discussed in December — giving the market a few weeks “to break Powell into submission and not taper faster.”
“It may not seem evident when looking at the broader averages, but in the bond ETFs, the dollar index, and the Treasury market, you see massive shifts taking place. All of this is pointing to tightening financial conditions, which are not favorable for stocks,” added Kramer.
