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U.S. Stocks Turning In Mixed Performance Amid Rising Bond Yields

wallstreet sept18 24feb21 lt

Stocks are turning in a mixed performance in morning trading on Wednesday as traders react to a continued increase in bond yields. The Dow has climbed into positive territory, while the tech-heavy Nasdaq has shown a notable move to the downside.

Currently, the major averages remain on opposite sides of the unchanged line. While the Nasdaq is down 59.12 points or 0.4 percent at 13,406.08, the Dow is up 122.38 points or 0.4 percent at 31,659.73 and the S&P 500 is up 6.20 points or 0.2 percent at 3,887.57.

The mixed performance on Wall Street comes as treasury yields are seeing further upside, with the yields on ten-year notes and thirty-year bonds reaching their highest intraday levels in a year.

The continued advance by bond yields comes even though Federal Reserve Chair Jerome Powell has once again reiterated that the Fed is likely to maintain its ultra-easy monetary policy for the foreseeable future.

Powell is currently testifying before House Financial Services Committee, with his prepared remarks mirroring those he delivered before the Senate Banking Committee on Tuesday.

Despite Powell's assurances, the increase in yields has still inspired some traders to cycle out of high-flying tech stocks.

News FDA staff have endorsed Johnson & Johnson's (JNJ) Covid-19 vaccine for emergency use may also be contributing to the mixed performance, with the move paving the way for final approval of the new single-dose vaccine.

On the U.S. economic front, data released by the Commerce Department showed a much bigger than expected jump in new home sales in the U.S. in the month of January.

The Commerce Department said new home sales spiked by 4.3 percent to an annual rate of 923,000 in January after soaring by 5.5 percent to a revised rate of 885,000 in December.

Economists had expected new home sales to surge up by 1.5 percent to a rate of 855,000 from the 842,000 originally reported for the previous month.

Many of the major sectors are showing only modest moves on the day, although substantial strength is visible among energy stocks. The rally by energy stocks comes as the price of crude oil for April delivery is jumping $1.52 to $63.20 a barrel.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index is up by 5.1 percent, the NYSE Arca Oil Index is up by 2.3 percent and the NYSE Arca Natural Gas Index is up by 1.7 percent.

Airline stocks have also shown a significant move to the upside on the day, with the NYSE Arca Airline Index soaring by 2.6 percent to its best intraday level in a year.

On the other hand, retail stocks are seeing notable weakness in morning trading, dragging the Dow Jones U.S. Retail Index down by 1.3 percent.

Office Depot parent ODP Corp. (ODP) and home improvement retailer Lowe's (LOW) are posting steep losses after reporting their quarterly results.

Software, networking and semiconductor stocks have also come under pressure, contributing to the drop by the tech-heavy Nasdaq.

In overseas trading, stock markets across the Asia-Pacific region moved sharply lower during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 1.6 percent, while Hong Kong's Hang Seng Index plunged by 3 percent.

Meanwhile, the major European markets have moved to the upside on the day. While the German DAX Index has advanced by 0.6 percent, the U.K.'s FTSE 100 Index is up by 0.2 percent and the French CAC 40 Index is up by 0.1 percent.

In the bond market, treasuries have climbed well off their worst levels of the day but remain in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 3.8 basis points at 1.400 percent.

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