Fed Chair Powell plays spoiler, stocks fall
04-Mar-21 16:20 ET
Dow -345.95 at 30924.14, Nasdaq -274.28 at 12723.49, S&P -51.25 at 3768.47
briefing.com
[BRIEFING.COM] The S&P 500 fell 1.3% on Thursday, although it was down as much as 2.5%, as long-term interest rates resumed their recent rise following some comments from Fed Chair Powell. The Nasdaq Composite (-2.1%) and Russell 2000 (-2.8%) dropped more than 2.0%, while the Dow Jones Industrial Average declined 1.1%.
In a conference hosted by The Wall Street Journal, the Fed Chair acknowledged that the recent upward adjustment in real rates caught his attention but affirmed that the current policy stance was appropriate. In other words, the Fed will not use its tools right now to intervene in the Treasury market, which has been pricing in inflation through higher Treasury yields on the back end of the curve.
The 10-yr yield, which was little changed prior to these comments, spiked and settled higher by eight basis points to 1.55%. Mr. Powell added that he would be concerned by a consistent tightening in financials conditions that threatens the achievement of the Fed's employment and inflation goals.
While Fed Chair Powell wasn't yet concerned, today's quick move in rates spoiled an early rebound bid in the broad market, taking nearly every S&P 500 sector into the red, each of the major indices below their 50-day moving averages, and the Nasdaq into correction territory (a decline of 10.0% or greater from a recent high).
The information technology (-2.3%), materials (-2.1%), and consumer discretionary (-2.0%) sectors declined at least 2.0%. The energy sector (+2.5%), however, was on its own path today, closing higher by 2.5%. The final standings improved in the last two hours of trading as yields stabilized.
Energy stocks followed oil prices ($63.83/bbl, +2.52, +4.1%) higher after OPEC+ agreed to maintain current production levels through next month, with the exceptions of Russia and Kazakhstan due to continued seasonal consumption patterns.
The communication services sector (+0.03%) also eked out a positive close amid support from its largest components. Separately, Snowflake (SNOW 249.00, +1.97, +0.8%) and Kroger (KR 34.09, +0.84, +2.5%) finished higher following their earnings reports.
The 2-yr yield was unchanged at 0.14%. The U.S. Dollar Index advanced 0.7% to 91.62. The CBOE Volatility Index increased 7.1% to 28.57.
Reviewing Thursday's economic data:
- Initial jobless claims for the week ending February 27 were up 9,000 to 745,000 (Briefing.com consensus 725,000). Continuing claims for the week ending February 20 were down 124,000 to 4.295 million.
- The key takeaway from the report is that it is still stunning how high initial jobless claims are. In the same week a year ago, they were 217,000.
- Q4 Productivity decreased from the previous quarter at an annual rate of 4.2% (Briefing.com consensus -4.8%) from the preliminary estimate of -4.8%, according to the revised estimate. Unit labor costs jumped at an annual rate of 6.0% (Briefing.com consensus 6.8%) versus the previously published annual rate of 6.8%.
- The key takeaway from the report is the indication that nonfarm business sector productivity grew 2.5% in 2020, marking the largest annual increase since 2010, as output declined 4.2% (largest on record going back to 1947) and hours worked fell 6.5% (largest decline since 2009).
- Factory orders for manufactured goods increased 2.6% m/m in January (Briefing.com consensus 2.0%) after increasing an upwardly revised 1.6% (from 1.1%) in December. This is the ninth consecutive monthly increase in factory orders.
- The key takeaway from the report is that it showed another increase in business spending, as nondefense capital goods excluding aircraft increased 0.4% m/m in January after increasing 1.5% in December. These orders are up 8.3% yr/yr.
Looking ahead, investors will receive the Employment Situation Report for February, the Trade Balance for January, and Consumer Credit for January, on Friday.
- Russell 2000 +8.7% YTD
- Dow Jones Industrial Average +1.0% YTD
- S&P 500 +0.3% YTD
- Nasdaq Composite -1.3% YTD
Market Snapshot
| Dow | 30924.14 | -345.95 | (-1.11%) | | Nasdaq | 12723.49 | -274.28 | (-2.11%) | | SP 500 | 3768.47 | -51.25 | (-1.34%) | | 10-yr Note | -5/32 | 1.541 |
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| | NYSE | Adv 719 | Dec 2421 | Vol 1.5 bln | | Nasdaq | Adv 597 | Dec 3222 | Vol 7.7 bln |
Industry Watch
| Strong: Energy, Communication Services |
| | Weak: Information Technology, Materials, Consumer Discretionary, Industrials |
Moving the Market
-- Stocks fall as long-term interest rates resumed rise following Fed Chair Powell's speech
-- Powell said current policy stance was appropriate
-- Energy stocks rallied with oil prices, OPEC+ agreed to not increase production next month
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Energy stocks and oil prices rise
04-Mar-21 15:30 ET
Dow -403.14 at 30866.95, Nasdaq -283.33 at 12714.44, S&P -57.45 at 3762.27
[BRIEFING.COM] The S&P 500 is currently down 1.5%, while the Russell 2000 is down 3.1%.
One last look at the S&P 500 sectors shows information technology (-2.3%), materials (-2.3%), and consumer discretionary (-2.2%) down more than 2.0%, while the energy (+1.8%) and communication services (+0.2%) sectors trade in positive territory.
WTI crude futures settled higher by 4.1%, or $2.52, to $63.83/bbl after OPEC+ agreed to leave output levels unchanged in April. |
