The Dow rose toward a record Wednesday morning and the broader stock market was buoyant after a report on inflation showed modest rises that matched economist expectations, nudging bond yields down.
What are major indexes doing?
- The Dow Jones Industrial Average DJIA, +1.11% rose 284 points, or 0.9%, to trade in record territory at around 32,130.
- The S&P 500 SPX, +0.92% gained 25 points, or 0.7%, to near 3,901.
- The Nasdaq Composite COMP, +1.25% jumped 108 points, or 0.8%, to about 13,180.
On Tuesday, the tech-heavy Nasdaq Composite jumped 464.66 points, or 3.7%, for its biggest one-day percentage gain since Nov. 4, according to Dow Jones Market Data. The bounce came a day after the index fell into correction territory, a pullback of 10% from a recent peak. The Dow rose 30.30 points, or 0.1%, while the S&P 500 logged a 1.4% gain.
What’s driving the market?
The U.S. February consumer-price index showed inflation rising modestly, in line with expectations. Inflation rose 0.4% for the month, but with food and energy stripped out, the gain was 0.1%. Headline CPI picked up to 1.7% from 1.4% on an annual basis while the core 12-month increase dipped to 1.3% from 1.4%.
U.S. Treasury yields retreated slightly Wednesday, pausing for now the dynamic that’s been driving a rotation out of shares of highflying technology stocks and other growth shares and into more cyclically sensitive, value-oriented equities.
The yield on the 10-year Treasury note TMUBMUSD10Y, 1.543% was down around 5 basis points at 1.547% ahead of an auction of $38 billion of benchmark 10-year notes. Yields have risen for five straight weeks along with inflation expectations.
“The rotation is not done,” said Tom Mantione, managing director with UBS Private Wealth Management. “Typically a move in the 10-year from a low base has been a positive for markets. The problem this time is it was so quick.”
“Lots of people feel like it’s a zero sum game — I own the reflation trade or I own tech,” Mantione said in an interview. “It would be wise for longer term investors to understand that there could be potential opportunities at the extremes to take advantage of this volatility. Take a day like Monday to buy stocks focused on disruptive tech like 5G, robotics, clean tech. Take a day like Tuesday to buy financials, energy, materials.”
“The recent rally in bond yields has hurt tech stocks the most, due to their high valuations,” said Charalambos Pissouros, senior market analyst at JFD, in a note.
“High-growth tech companies are valued based on earnings expected years into the future, and thus, when yields rise, their discounted present value declines. The opposite is true when yields retreat. That’s why Nasdaq was the main gainer yesterday,” Pissouros said.
Yields are being driven higher as investors look for U.S. economic growth to surge and for inflation to accelerate, at least in the near term. The OECD said this week that President Biden’s coronavirus aid package will add about one percentage point to global economic growth in 2021 and America’s growth rate was revised up to 6.5% from 3.2%.
The House is expected to complete passage of a $1.9 trillion COVID-19 relief bill as early as Wednesday, which comes on top of past rounds of aid spending.
Economic Preview: The U.S. economy is ready to surge again — so is inflation
Data on the federal budget is set for release at 2 p.m. It’s expected to show a $255 billion deficit.
Which companies are in focus?
- General Electric Co. GE, -5.32% shares fell 2.5% in early trade after it agreed to combine its aircraft-leasing business with Ireland’s AerCap Holdings NV as part a deal valued at more than $30 billion. Separately, GE said its board of directors would recommend approval of a 1-for-8 reverse stock split, given the industrial conglomerate’s “significant transformation” over the past several years.
- Shares of Tupperware Brands Corp. TUP, -24.97% slid 17% after the bell, after the food storage products company swung to a fourth-quarter profit that was well short of expectations, while saying efforts to “fix” its core business were starting to take hold.
- Shares of videogame retailer GameStop Corp. GME, +17.77% were up 8.6% after a Tuesday rally took the meme-stock favorite of traders on Reddit’s WallStreetBets forum to its highest finish since the end of January.
- Roblox Corp. received a reference price of $45 a share from the New York Stock Exchange late Tuesday as the tween-centric game platform prepares to go public through a direct listing on Wednesday. It will trade under the ticker RBLX.
- Shares of MongoDB Inc. MDB, +2.64% rose 4.9% after the bell after the database company delivered results late Tuesday that topped Wall Street estimates while its outlook was much more muted.
- Qualtrics International Inc. XM, -2.84% shares were down 3.7% after the experience-management software company reported fiscal fourth-quarter results that topped analysts’ forecasts.
What are other markets doing?
- The ICE U.S. Dollar Index DXY, -0.10% a measure of the currency against a basket of six major rivals, ticked down 0.1% after hitting a more-than-three-month high on Monday.
- Oil futures edged higher ahead of a report on inventory, with the U.S. benchmark CL.1, +1.36% up 51 cents or 0.8% to $64.52.
- Gold futures GC00, +0.01% were fractionally lower near $1,716.00 an ounce.
- The pan-European Stoxx 600 SXXP, +0.44% ticked up 0.4% and London’s FTSE 100 UKX, +0.04% lost 0.1%.
- In Asia, the Shanghai Composite SHCOMP slipped 0.1%, while Hong Kong’s Hang Seng Index HSI rose 0.5% and Japan’s Nikkei 225 NIK was virtually unchanged at 29,036.56.