US equities traded lower on Wednesday morning, but were mostly lower than earlier lows, after economic reports pointed to a healthy economy in both the consumer and manufacturing sectors, but also suggested that inflation could move faster than investors expected, which would increase the rates of return.
How do equity positions perform?
-
The Dow Jones Industrial Average DJIA,
-0.20%
was 60 points lower, near 31,463, a decrease of 0.2%. -
The S&P 500 Index SPX,
-0.53%
decreased 23 points to reach 3,910, with 0.6% less. -
The Nasdaq Composite COMP,
-1.21%
tumbled 182 points, or 1.3%, to close at 13,874.
On Tuesday, the Dow ended on a record high, but the S&P 500 and Nasdaq Composite indices snapped a series of gains of two days to finish lower.
What drives the market?
U.S. retail sales figures for January saw the latest reading of consumer health amid the coronavirus pandemic, with sales prices up 5.3% for the month, down 1% in December, while the COVID cases have increased. But U.S. producer prices have risen 1.7% over the past year, up from 0.8% in the previous month.
A separate report on the Federal Reserve’s industrial production showed a 0.9% increase in January, which also increased economists’ forecasts by 0.5%. Businesses replenished their inventory in December more than expected, but confidence in homebuilders was stronger than expected.
However, the producer price index jumped by 1.3% in January, the biggest rise since the index underwent a major overhaul in 2009 and service prices were included in the report. The rate of wholesale inflation has risen to 1.7% over the past 12 months from 0.8% at the end of 2020 – not far from the pre-pandemic level of 2%.
The data helps boost U.S. yields, as investors also look forward to the prospect of more congressional fiscal stimulus and declining coronavirus cases. On Tuesday, the 10-treasury letter TMUBMUSD10Y,
According to Dow Jones Market Data, it returned 1.30%, the highest level since February 26.
“The retail sales were incredible, and PPI was also very strong, but we’ve had a few months before,” said Peter Andersen, founder of Andersen Capital Management in Boston. ‘It’s just too hard to extrapolate in a month. This may show a pent-up question, but the dynamic question is currently still too difficult to filter. I think it can show what the pent-up question is once we get through the vaccination. We will leave after the race. ‘
In an interview with MarketWatch, Andersen calls himself “very shocked at the attention investors are paying to shiny items such as Bitcoin, space exploration, SPACs.” The market may use some indication of more news on vaccine progress, but overall it is not a concern except for a few frothy areas.
“Markets are showing small losses today as concerns about rising government bond yields have encouraged some traders to reduce their exposure to equities,” said David Madden, CMC Markets UK market analyst.
“Recently, the mood in the stock markets worldwide has been very positive, as multi-year highs have occurred, and in some cases have reached an all-time high,” Madden wrote. ‘Purchase was fueled by hopes of more stimulus spending by the Biden government. The contribution was also that the notion that successful vaccination of vaccines could help reopen the economy, and that economic activity in turn would increase later this year, ”refers to President Joe Biden’s $ 1.9 billion COVID aid proposal.
Meanwhile, icy weather is causing problems in large parts of the US, including Texas, leaving millions of people without power and nearly 75% of the lower 48 states covered in snow, The Wall Street Journal wrote, citing the national snow analysis of the National Oceanic and Atmospheric Administration. report. The icy weather reduced U.S. oil production and raised prices.
In other economic reports, investors will look for a few minutes at the Federal Reserve’s policy meeting at 2pm and further clues on how the central bank will respond to economic improvement due to greater fiscal spending and effective vaccine deployment.
Among the Fed speakers on tap today would be Thomas Barkin, the Federal Reserve Bank of Richmond, speaking at 9 a.m., the president of Boston’s Fed, Eric Rosengren, would speak an hour later and Robert Kaplan, president of Dallas, speaking Wednesday after 6 p.m.
See: Big flight in the city has led to rising house prices in the suburbs – Will it survive the pandemic?
Which stocks are in focus?
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Shares of Verizon Communications Inc. VZ increased by 3.7% and Chevron Corp. CVX rose 3.2% to accelerate the Dow after Warren Buffett’s Berkshire Hathaway Inc. BRK.B announced that it had acquired major interests in the companies during the fourth quarter.
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Canadian Marijuana Company Sundial Growers Inc.. SNDL filed a shelf registration with the Securities and Exchange Commission to issue up to $ 1 billion worth of bonds over time. Shares previously traded up more than 15%.
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Medical equipment manufacturer Medtronic PLC MDT said Wednesday it is voluntarily recalling the unused Valiant Navion thoracic implantation system and notifying doctors to immediately stop using the device until further notice. Shares slipped 1.4%.
- Energy Transfer LP ET announced a purchase agreement on Wednesday Activate Midstream Partners LP ENBL in a $ 7.2 billion share transaction.
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Shares of Hilton Worldwide Holdings Inc. HLT fell 1.1% on Wednesday after the hotel operator reported a surprising loss and revenue in the fourth quarter, which fell more than forecast as the rise in COVID-19 cases and the tightening of travel restrictions positive momentum seen in summer and autumn disturbed.
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Shopify Inc.
SHOP,
-7.46%
equities fell 5.7% despite better-than-expected quarterly results.
What do other assets do?
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The yield on the 10-year treasury note TMUBMUSD10Y,
1,282%
dropped almost 3 basis points to 1.289%. Yields and bond prices are moving in opposite directions. -
The ICE dollar index DXY, a measure of the currency against a basket of six major competitors, rose 0.5%.
-
Oil futures have risen higher as energy outages continue across the country, with the US benchmark CL.1,
+ 0.50%
with 0.2% higher to $ 60.20 a barrel, past the key $ 60 level. Gold futures GC00,
-1.41%
fell 1.2% to about $ 1,778.20 as bond yields rose. -
The pan-European Stoxx 600 index SXXP fell 0.4% and the London FTSE 100 stock index UKX was down 0.2%.
-
Markets in Hong Kong HSI,
+ 1.10%
closed 1.1% higher, while the NIKE 225 index NIK rose 0.6% with Japan.
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