Stocks Fall on New Economic Data
By Anna Hirtenstein
U.S. stocks edged lower Thursday as a flurry of data showed that
the economy is continuing to slowly recover.
The S&P 500 ticked down 0.3%, and the Nasdaq Composite
retreated 0.6%. The Dow Jones Industrial Average dropped 0.1% after
Wednesday's all-time high.
Fresh data on Thursday showed that weekly jobless claims fell to
730,000 for the week ended Feb. 20, a decline from the previous
week and less than what economists expected. The U.S. economy grew
in the fourth quarter at an annualized rate of 4.1%. New durable
goods rose 3.4% in January for the ninth straight month as
manufacturing continued to rebound.
Investors' appetite for risky assets had rebounded Wednesday on
Federal Reserve Chairman Jerome Powell's comments that the central
bank will keep interest rates low for a while.
Still, the recent sharp rise in bond yields -- which closed
Wednesday at their highest level in a year -- has been making some
money managers more cautious. Those investors are weighing shifting
funds into less risky assets, such as bonds, and into stocks with
lower valuations than technology companies.
"The market is jittery. The bond yields' rising is putting
equities, especially growth stocks, under pressure," said Sebastien
Galy, a macro strategist at Nordea Asset Management. "There is a
bit of a risk reduction broadly," he added.
Optimism about the economic recovery is prompting investors to
shift funds into stocks that are likely to benefit from a rebound
this year. That is weighing on technology shares, which powered
much of last year's rally.
"The rise in bond yields triggers this rotation, away from
growth stocks and more in favor of value stocks," said Sophie
Chardon, cross asset strategist at Lombard Odier. "The rise in
yields is supportive for banks, higher oil prices are supportive
for energy. It is a change of leadership."
The yield on the benchmark 10-year Treasury note ticked up to
1.460%, from 1.388% on Wednesday. The yield on government bonds has
been on the rise as investors cut their holdings of the safest
Investors are also closely watching for signs of inflation
jumping following large doses of monetary and fiscal stimulus. At
the same time, markets have also turned cautious as recent economic
data showed that the rebound is likely to be slow and halting.
The earnings season is winding down: Airbnb, Beyond Meat,
DoorDash and Salesforce.com are scheduled to release their results
Stocks popular with Reddit users on the WallStreetBets forum
soared in the last hour of trading on Wednesday, in volatility
reminiscent of activity seen last month. In premarket trading,
GameStop climbed 55% and AMC Entertainment rose 11%.
The moves show "there is still liquidity and a lot of access to
speculative bets," said Ms. Chardon. "We have to be prepared to
live with this kind of targeted bubble, but I wouldn't see it as a
threat to the global equity market."
Ahead of the market open, Moderna gained over 3% after it
announced a plan to increase its manufacturing capacity of Covid-19
vaccines. Best Buy tumbled 5.4% after it said it anticipates a
slowdown in sales growth in 2021.
Oil prices continued to tick up, with Brent crude rising for the
fourth day. The international gauge for oil added 0.5% to $66.51 a
barrel, near its highest level since January 2020.
Overseas, the pan-continental Stoxx Europe 600 edged down
Among individual equities, beer maker Anheuser-Busch InBev fell
almost 5% after its fourth-quarter profit came in below estimates.
British packaging company DS Smith jumped over 6% on reports that
rival Mondi is exploring a takeover.
Investors have also been selling European government bonds in
recent weeks as they look for higher returns. The yield on French
10-year bonds, which moves inversely to the price, ticked up above
zero for the first time since June and reached as high as
In Asia, most major benchmarks finished the day up. The Shanghai
Composite Index added 0.6% and Hong Kong's Hang Seng Index climbed
1.2%. South Korea's Kospi Index rallied 3.5% after its central bank
kept interest rates at historic lows.
Write to Anna Hirtenstein at email@example.com
(END) Dow Jones Newswires
February 25, 2021 09:50 ET (14:50 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.