U.S. Stocks Open Higher While Yields Extend Their Climb
March 05 2021 - 10:03AM
Dow Jones News
By Joe Wallace
U.S. stocks climbed on February's stronger-than-expected
employment report, while government bond yields also extended their
recent surge.
The S&P 500 edged up 1.1% in early New York trading, erasing
a big part of its declines for the week. Thursday, the broad index
dropped to its lowest level since the end of January.
The Nasdaq Composite Index ticked 1% higher, after tech stocks
dropped on Thursday. The Dow Jones Industrial Average also added
1%, or 300 points.
"There's volatility to be expected, especially after we've had a
bit of a selloff, a bit of a rocky week," said Cliff Hodge, chief
investment officer at Cornerstone Wealth. "It's not surprising that
we're bouncing around. People are looking for direction."
Earlier, stock-index futures had been up modestly ahead of the
jobs data, before giving up their gains and then trading higher
again.
The February jobs report showed the economy added 379,000 new
jobs last month, ahead of estimates of 210,000. The unemployment
rate was 6.2%, versus the consensus of 6.3%. Those figures add to
signs of a slow improvement in the labor market, after data on
Thursday showed filings for unemployment benefits reached their
lowest level in three months.
Stocks have stumbled in recent weeks as a climb in bond yields
has called into question whether low interest rates, which
propelled valuations higher for much of the past year, can continue
for much longer. Yields, which rise as bond prices fall, have
rallied in response to expectations of a quickening pace of growth
and inflation as the economy reopens from the coronavirus
pandemic.
The yield on 10-year Treasury notes rose again Friday to 1.598%,
from 1.547% Thursday. That marked the highest level for the
benchmark borrowing cost since February last year. The recent climb
in yields came after Federal Reserve Chairman Jerome Powell
provided no sign the central bank would seek to stem the rise when
he spoke at The Wall Street Journal Jobs Summit.
"It is all about the bond-yield moves. It is all about Jerome
Powell," said Edward Park, chief investment officer at Brooks
Macdonald. "There is a huge amount of uncertainty in the market at
the moment as to whether the inflation that is widely expected in
the short term is transient or whether it is more sustained."
Bond yields are likely to keep rising and stocks may remain
jittery unless the Fed takes concrete steps to put a cap on yields,
according to Mr. Park. "Markets are at their most volatile when
they are not sure how monetary policy and fiscal policy is going to
react."
Technology stocks have borne the brunt of the shift in sentiment
in recent weeks. The Nasdaq Composite Index, a closely watched
barometer for the sector, on Thursday fell to its lowest level
since Jan. 4. The index ended the day down 9.7% from its Feb. 12
high, putting it just short of correction territory.
Ahead of the bell in New York, shares of Gap rose 4%. Executives
at the firm late Thursday predicted a rebound in apparel sales in
the second half of the year after a difficult 2020. Norwegian
Cruise Line Holdings dropped 7.5% after the cruise operator said it
started a public stock offering.
Shares of energy companies including Exxon Mobil and Occidental
Petroleum received a boost from rising oil prices after an
unexpected decision by OPEC and its partners to roll over
production cuts in April.
The jobs report may not sway bond yields much because the data
are unlikely to affect the progress of the Biden administration's
stimulus package through the Senate, said Lyn Graham-Taylor, senior
rates strategist at Rabobank. The Senate on Thursday advanced the
$1.9 trillion bill after making a series of adjustments, and is
expected to give its approval within days.
Yields are likely to keep heading higher, according to Mr.
Graham-Taylor. "So far the Fed's emphasized that it's not loving
it, but it is pretty comfortable with it," he said. "In the back of
their minds, it is natural for yields to rise a bit: We're not in
the eye of the storm as we were."
Oil prices rallied for a second day after OPEC and a Russia-led
coalition of oil producers kept most of their production cuts in
place, taking the market by surprise. Brent-crude futures rose 2.6%
to $68.47 a barrel. The cartel's decision will push the
international energy benchmark to $75 a barrel in the second
quarter and $80 in the third, analysts at Goldman Sachs Group
said.
Overseas, the pan-continental Stoxx Europe 600 ticked down 0.3%.
Among individual stocks in the region, London Stock Exchange Group
dropped 8.8% after profits fell short of analysts' forecasts in the
second half and costs topped expectations.
Major Asian indexes ended the day down. Japan's Nikkei 225
ticked 0.2% lower, while Hong Kong's Hang Seng Index dropped almost
0.5%.
Karen Langley contributed to this article.
Write to Joe Wallace at Joe.Wallace@wsj.com
(END) Dow Jones Newswires
March 05, 2021 09:48 ET (14:48 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.