US stocks mostly lower as inflation fears push 10-year Treasury yield above 4%

What’s happening

• The Dow DJIA,
  +0.92%
  it rose 279 points, or 0.9%, to 32,943.

• The S&P 500 SPX,
  +0.59%
  it rose 19 points, or 0.5%, to 3,970.

• The Nasdaq Composite COMP,
  +0.51%
  it rose 50 points, or 0.4%, to 11,428.

On Wednesday, the Dow posted a small gain, while the S&P 500 fell 0.5% and the Nasdaq 0.7%.

What is driving the markets?

Stocks were trying to bounce Thursday afternoon despite rising bond yields that initially weighed on stocks.

“Some of the components of the Dow performed well in terms of earnings,” Don Townswick, Conning’s director of equity strategy, said in a phone interview. “It’s a classic case where we have better-than-expected earnings, on the face of it, and that tends to spur some positive market moves.”

Bond yields extended their rise after a round of US jobs data on Thursday. First-time jobless claims fell to 190,000 last week from 192,000 the week before. Fourth quarter labor productivity was revised down and unit labor costs were revised up.

Atlanta Fed President Raphael Bostic said on Thursday that he was strongly in favor of a 25 basis point rate hike at the central bank’s policy meeting in late March, saying a case can also be made for revise the Fed’s current terminal 5%-5.25% rate projection. Speculation that a recent round of hot labor and inflation data has fed federal funds futures traders pricing in the possibility of a 50 basis point rise in March.

Bostic’s comments “may have helped, but it’s more due to the fact that while yields soared, stocks pretty much held up despite their initial decline,” said Peter Cardillo, chief market economist at Spartan Capital Securities. in a telephone interview. He also said earlier declines in shares may have attracted bargain hunting.

Recent data indicated that the Federal Reserve’s interest rate hike campaign has yet to significantly slow the US economy and contain inflation, driving up benchmark borrowing costs TMUBMUSD10Y,
4.078%
above 4% as traders bet the central bank will have to further tighten monetary policy.

Data on weekly jobless claims and labor productivity released Thursday morning pointed to continued tightness in the labor market and rising labor costs.

“Data releases like this are why policymakers continue to reiterate their intention to raise rates before pausing, and then [to leave] rates in tight territory for quite some time,” Thomas Simons, money market economist at Jefferies, said in a note.

“They recognize that inflation has dropped from the highs of the last few [months], but they are concerned that it will settle at a level above their 2% target,” Simons said. “The bounce in the January data is exactly the sort of thing that worries you,” she wrote, referring to a hotter-than-expected set of labor and inflation data.

The Fed is expected to raise its policy interest rate to a range of 4.75% to 5% at its meeting on March 22. Since the central bank began raising borrowing costs from zero about a year ago, the S&P 500 Index has declined more than 9% and remains about 17% below its record close on January 3, 2022.

Townswick in Conning said he still has “some doubts about earnings quality” and that “we really don’t see any growth forecast at this point in earnings.” But he also believes the stock market could achieve an average return in 2023, roughly in the 6% to 8% range, with much of the cost of higher interest rates likely discounted.

“The good news is that markets have weathered a pretty good tightening cycle,” he said.

Eurozone data released Thursday showed annual consumer price inflation of 8.5% in February, just a fraction below January’s 8.6% and higher than the 8.2% forecast by economists.

Investors were also monitoring a 6.6% drop in shares of tesla inc
TSLA,
-6.61%
after the investor day of the electric vehicle manufacturer did not impress investors. On the other hand, a jump of 12.5% ​​in the shares of Salesforce following its results after the closing bell on Wednesday led the Dow gainers.

R.ead: With 10-year Treasury topping 4%, ‘time to start dipping,’ says Wamco

Companies in focus

• Actions of snowflake inc.
  SNOW,
  -11.54%
  fell about 12%. The data software group said after the closing bell on Wednesday that it expects $568 million to $573 million in product revenue in the first quarter, while the FactSet consensus called for $582 million.

• Identity Management Software Group Shares Okta Inc.
  OKTA,
  +12.14%
  rose more than 11% after revealing results and forecasts that broke expectations.

• Macy’s Inc.
  METER,
  +11.38%
  The shares soared nearly 10%, after the department store chain beat fourth-quarter earnings estimates and offered upbeat guidance for fiscal 2023.

• Best Buy Co.
  BBY,
  -2.02%
  It fell 2% after the consumer electronics retailer reported fiscal fourth-quarter earnings and revenue that beat expectations but provided a bearish outlook for the full year as the slowing economy puts pressure on consumers.

Motors and agitators: Tesla and Hormel fall, while shares of Salesforce, Macy’s and Kroger rise

—Jamie Chisholm contributed reporting