Stocks dipped Wednesday, extending losses from a day earlier as investors weighed optimism over widespread post-pandemic business reopenings against concerns over economic overheating.
Technology stocks again endured a selloff, and the Nasdaq sank by 2.5% as investors rotated to cyclical shares poised to benefit from easing stay-in-place orders. Airlines, cruse lines and hotel stocks increased. The S&P 500 dipped by more than 1%, while the Dow erased earlier gains to trade near the flat line.
Treasury yields resumed advancing across the curve, and the yield on the benchmark 10-year Treasury note closed in on 1.5%. A disappointing report on private payrolls growth in February also weighed on many risk assets Wednesday, suggesting the labor market was still struggling to make headway amid the ongoing pandemic.
Elsewhere, shares of online mortgage provider Rocket Companies (RKT) pulled back during the pre-market session. The stock surged 71% to a record high on Tuesday and triggered a volatility halt after investors on Reddit appeared to target the heavily shorted stock as another short-squeeze candidate.
Investors this week have fixed their gaze on the next several months, when vaccine-enabled reopenings will help boost service-centric companies that had been heavily beaten down last year. President Joe Biden said that the U.S. now expects to have enough COVID-19 vaccines for all adults who want one by the end of May, pulling forward that target by two full months from the government's previous forecast. The drugmaker Merck (MRK) is set to help produce Johnson & Johnson's (JNJ) single-dose COVID-19 vaccine that was authorized over this past weekend, which would help speed the pace of inoculations in the U.S.
Plus, the U.S. Senate is debating the contours of another stimulus package worth up to $1.9 trillion this week, with congressional lawmakers racing to pass another relief bill before a mid-March cliff for federal unemployment benefits authorized under the last package.
At the same time, the likelihood of increased government spending alongside widespread business reopenings has raised the specter of both speedy growth in the U.S. economy, but also rising inflationary pressures. And last week's jump in Treasury yields – with the benchmark 10-year yield reaching a one-year high of 1.61% – remains fresh in the minds of investors, who have been eyeing the rise in interest rates as a possible hindrance to the recovery and deviation from last year's ultra-low borrowing costs backdrop.
"One of the fundamental underpinnings of strong equity performance the last six to nine months has been very low yields. And yields are not as low today as they were just a few weeks ago," Eric Winograd AllianceBernstein senior economist, told Yahoo Finance. "When we think about how that yield move will play out, the bond market takes a staircase up. You get sharp moves up and then a period when it moves sideways and consolidates, and then another sharp move higher. So I think we should expect that basic pattern to repeat a handful of additional times over the course of the next few quarters."
4:01 p.m. ET: Stocks end lower, Nasdaq sheds 2.7%
Here's where the three major indexes ended Wednesday's session:
S&P 500 (^GSPC): 3,819.83, -50.46 points (-1.3%)
Dow (^DJI): 31,272.44, -119.08 points (-0.38%)
Nasdaq (^IXIC): 12,997.75, -361.04 points (-2.7%)
2:04 p.m. ET: Fed says economic activity 'expanded modestly' from January to February: Beige Book
In the Federal Reserve's latest Beige Book, the central bank underscored that the U.S. economic recovery continued at an only moderate pace at the beginning of this year.
The Beige Book, or collection of anecdotes across the Fed districts released before each Fed meeting, noted that "Most businesses remain optimistic regarding the next 6-12 months as COVID-19 vaccines become more widely distributed."
"Economic activity expanded modestly from January to mid-February for most Federal Reserve Districts," according to the Beige Book, "Although a few Districts reported slight improvements in travel and tourism activity, overall conditions in the leisure and hospitality sector continued to be restrained by ongoing COVID-19 restrictions."
The Beige Book added that overall manufacturing activity "increased modestly" from the previous report from mid-January, and that employment levels across the U.S. "rose over the reporting period, albeit slowly."
12:53 p.m. ET: Stocks mixed, Nasdaq sheds more than 1% as tech rout extends further
The three major indexes traded mixed Wednesday during the afternoon session, with the Nasdaq falling by more than 1% for a second straight session as tech shares lagged.
The energy, financials and industrials sectors – all cyclical sectors poised to benefit from a strengthening economic backdrop — outperformed in the S&P 500, and crude oil jumped above $61 per barrel. The information technology sector lagged in the blue-chip index.
Boeing, JPMorgan Chase and American Express led the Dow's 0.3% advance Wednesday afternoon. Shares of Salesforce, Microsoft and Johnson & Johnson each pulled back in afternoon trading.
10:46 a.m. ET: Biden agrees to narrow eligibility for stimulus checks: Bloomberg
President Joe Biden agreed to bring down the eligibility limit for Americans qualifying for the $1,400 stimulus payments in the next pandemic relief package, Bloomberg first reported on Wednesday. Two Democratic sources confirmed the matter to Yahoo Finance.
With the new threshold, individuals earnings more than $80,000 would not qualify for the payments, down from the $100,000 cap in the earlier legislation. Couples earning more than $160,000 would not qualify, down from the $200,000 previously.
10:00 a.m. ET: Service sector activity unexpectedly slows in February: ISM
Activity in the U.S. service sector unexpectedly slowed down in February from a two-year high, according to the Institute of Supply Management's (ISM) monthly survey.
The service sector purchasing managers' index (PMI) ticked down to 55.3 in February from 58.7 in January, which had been the highest level since early 2019. Readings above the neutral level of 50.0 indicate expansion of a sector. Consensus economists were looking for the index to hold steady at 58.7, according to Bloomberg data. Still, the print marked the ninth straight month of expansion for service sector activity, which comprises the vast majority of overall U.S. economic activity.
9:31 a.m. ET: Stocks trade choppily, fluctuating between small gains and losses
Here's where markets were trading just after market open:
S&P 500 (^GSPC): 3,871.90, +1.61 points (+0.04%)
Dow (^DJI): 31,447.76, +56.24 points (+0.18%)
Nasdaq (^IXIC): 13,371.30, +8.71 points (+0.07%)
Crude (CL=F): $60.82 per barrel, +$1.07 (+1.79%)
Gold (GC=F): $1,707.00 per ounce, -$26.60 (-1.53%)
10-year Treasury (^TNX): +5.9 bps to yield 1.474%
8:15 a.m. ET: Private payrolls rose less than expected in February: ADP
U.S. private employers added back fewer jobs than expected in February, disappointing economists who had anticipated that the early stages of the vaccine rollout and falling COVID-19 cases would allow hiring to pick up strongly during the month.
Private payrolls in the U.S. grew by 117,000 in February, ADP said in its closely watched monthly report Wednesday morning. This followed an upwardly revised gain of 195,000 payrolls in January, which had in turn reversed a drop of about 75,000 payrolls in December. Consensus economists expected a rise of 205,000 private payrolls for February, according to Bloomberg consensus data.
The report comes two days before the Labor Department's monthly jobs report. Consensus economists expected to see that non-farm payrolls rose by a net 195,000 in February, including a gain of 200,000 private payrolls.
7:12 a.m. ET: Stock futures aim for a rebound
Here's where markets were trading ahead of the opening bell on Wednesday:
S&P 500 futures (ES=F): 3,892.25, up 24.75 points or 0.64%
Dow futures (YM=F): 31,578.00, up 220.00 points or 0.7%
Nasdaq futures (NQ=F): 13,151.50, up 96.25 points or 0.74%
Crude (CL=F): $60.82 per barrel, +$1.07 (+1.79%)
Gold (GC=F): $1,722.70 per ounce, -$10.90 (-0.63%)
10-year Treasury (^TNX): +3.1 bps to yield 1.446%
7:05 a.m. ET Wednesday: Mortgage applications increased only slightly last week as rates jumped
Mortgage applications were nearly unchanged last week as rising mortgage rates deterred purchases and refinances after a surge in housing market activity in 2020.
The Mortgage Bankers' Association's weekly index trading mortgage application volume rose just 0.5% during the week ended February 26 from the prior week. This followed a slump of 11.4% in mortgage application volume during the prior week. Refinances increased by 0.1% week-over-week but were still 7% higher than a year earlier. Purchases rose by 2% over the previous week and were 5% higher year-over-year, on an unadjusted basis.
“Mortgage rates jumped last week on market expectations of stronger economic growth and higher inflation. The 30-year fixed rate experienced its largest single-week increase in almost a year, reaching 3.23 percent – the highest since July 2020,” said Joel Kan, MBA associate vice president of economic and industry forecasting, said in a press statement.
Still, he added, “The housing market is entering the busy spring buying season with strong demand."
6:08 p.m. ET Tuesday: Stock futures open slightly higher
Here's where markets were trading Monday evening:
S&P 500 futures (ES=F): 3,873.00, up 5.5 points or 0.14%
Dow futures (YM=F): 31,414.00, up 56.00 points or 0.18%
Nasdaq futures (NQ=F): 13,080.50, up 25.25 points or 0.19%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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