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U.S. Stocks Under Pressure Amid Increase In Bond Yields

wallstreet nov02 25feb21 lt

Stocks have moved mostly lower over the course of morning trading on Thursday, partly offsetting the strong gains posted in the previous session. The major averages have all moved to the downside, with the tech-heavy Nasdaq leading the way lower.

In recent trading, the major averages have fallen to new lows for the session. The Dow is down 150.79 points or 0.5 percent at 31,811.07, the Nasdaq is down 136.94 points or 1 percent at 13,461.02 and the S&P 500 is down 29.10 points or 0.7 percent at 3,896.33.

The weakness on Wall Street may partly reflect profit taking following yesterday's rally, which lifted the Dow to a new record closing high.

Traders also remain concerned about a continued increase in bond yields, with yields on ten-year notes and thirty-year bonds once again reaching their highest intraday levels in a year.

The increase in yields comes following the release of a batch of largely upbeat U.S. economic data, including a report from the Labor Department showed a steep drop in first-time claims for U.S. unemployment benefits in the week ended February 20th.

The Labor Department said initial jobless claims tumbled to 730,000, a decrease of 111,000 from the previous week's revised level of 841,000.

Economists had expected jobless claims to drop to 838,000 from the 861,000 originally reported for the previous week.

With the much bigger than expected decrease, jobless claims fell to their lowest level since hitting 716,000 in the week ended November 28th.

The Commerce Department also released a report showing new orders for U.S. manufactured durable goods spiked by much more than expected in the month of January.

The report said durable goods orders soared by 3.4 percent in January after jumping by an upwardly revised 1.2 percent in December.

Economists had expected durable goods orders to surge up by 1.1 percent compared to the 0.5 percent increase that had been reported for the previous month.

Excluding a sharp increase in orders for transportation equipment, durable goods orders still jumped by 1.4 percent in January after spiking by an upwardly revised 1.7 percent in December.

Ex-transportation orders had been expected to climb by 0.7 percent, matching the increase that had been reported for the previous month.

A separate report released by the Commerce Department showed U.S. gross domestic product jumped by slightly more than originally estimated in the fourth quarter of 2020.

The Commerce Department said GDP surged up by 4.1 percent in the fourth quarter compared to the previously reported 4.0 percent spike. The upward revision matched economist estimates.

Meanwhile, the National Association of Realtors released a report showing a steep drop in U.S. pending home sales in the month of January, with inventory constraints continuing to hold back prospective buyers,

NAR said its pending home sales index tumbled by 2.8 percent to 122.8 in January after rising by 0.5 percent to an upwardly revised 126.4 in December.

Economists had expected pending home sales to come in unchanged compared to the 0.3 percent dip originally reported for the previous month.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Airline stocks are pulling back sharply after soaring over the past several sessions, with the NYSE Arca Airline Index plunging by 2.4 percent. The index ended the previous session at its best closing level in a year.

Substantial weakness has also emerged among semiconductor stocks, as reflected by the 2.1 percent slump by the Philadelphia Semiconductor Index.

Computer hardware, housing and gold stocks are also seeing notable weakness, while oil service and natural gas stocks are adding to recent gains.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index shot up by 1.7 percent, while South Korea's Kospi spiked by 3.5 percent.

Meanwhile, the major European markets are turning in a mixed performance on the day. While the German DAX Index is down by 0.2 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index are both up by 0.3 percent.

In the bond market, treasuries are seeing notable weakness following the upbeat economic data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 8.3 basis points at 1.472 percent.

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