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Market Snapshot: Dow rises and broader market aims to halt 3-session slide to end holiday-shortened week

U.S. equity benchmarks rise modestly Friday morning at the open as the stock market attempts to halt a three-day losing streak for the S&P 500 and Nasdaq Composite. Read More...

U.S. equity benchmarks were rising modestly Friday morning as the stock market attempted to halt a three-day losing streak for the S&P 500 and Nasdaq Composite.

Equities have been supported by the prospect of another round of fiscal stimulus from Washington, easy-money policies from the Federal Reserve, and the beginning of a recovery from the COVID-19 pandemic as vaccines are rolled out, but rising U.S. bond yields have raised questions about valuations.

How are stock benchmarks performing?
  • The Dow Jones Industrial Average DJIA, +0.13% was rising 70 points to reach 31,565, a gain of 0.2%.
  • The S&P 500 index SPX, +0.19% was rising 11 points, or 0.3%, at 3,925.
  • The Nasdaq Composite Index COMP, +0.44% was climbing 60 points, or 0.4%, to reach 13,928.

On Thursday, the Dow snapped a record winning streak, while the Nasdaq Composite and S&P 500 booked their third straight declines, representing the longest losing streak for the Nasdaq since October and the longest string of losses for the Dow since the four-session skid ended Dec. 14.

For the week, the Dow is aiming for a weekly gain of about 0.1%, the S&P 500 is on track for a 0.5% weekly decline, while the Nasdaq is on pace for a 1.6% weekly skid, based on Thursday’s close.

What’s driving the market?

Weakness in the labor market and worries about rising bond yields have put pressure on the broader equities market this week, especially after a surprise increase in the number of Americans seeking jobless benefits in the latest data weighed on the outlook.

On Friday, the market will be on the lookout for data on the U.S. services and manufacturing sectors that are due midmorning, as well as a report on existing home sales.

Market participants have been expecting further government spending to help mitigate the economic damage from the COVID pandemic, with ongoing negotiations in Congress on the Biden administration’s $1.9 trillion aid package.

During a CNBC interview on Thursday evening, U.S. Treasury Secretary Janet Yellen advocated for more rather than less aid for Americans and said that the risks of doing too little outweighed those for doing too much.

“We think it’s very important to have a big package that addresses the pain this has caused—15 million Americans behind on their rent, 24 million adults and 12 million children who don’t have enough to eat, small businesses failing,” Yellen told CNBC. The House of Representatives will try to pass a $1.9 trillion coronavirus relief plan before the end of February, Speaker Nancy Pelosi said Thursday.

There are also growing expectations that the coronavirus vaccine rollout will bolster economic recovery in the second half of 2021. The U.S. averaged 72,831 new cases a day in the past week, down 44% from the average two weeks ago, while so far 59.1 million vaccine doses have been given, to about 17.8% of the population.

However, optimism around a robust economic rebound has underpinned a rise in U.S. Treasury yields as investors rotate out of government debt and increase their position in assets that might perform well in a so-called reflationary environment.

“Market moves of late-and particularly in the last week-sent a clear story of optimism about the US economy,” wrote BofA Global Research analysts, led by U.S. economist, Michelle Meyer, in a research note dated Friday.

“We currently forecast 6.0% GDP growth this year and 4.5% next year, leaving us on the very high end of the economic consensus. The risk is that growth will be even stronger given prospects for greater stimulus,” the research team wrote.

The 10-year Treasury note TMUBMUSD10Y, 1.322% was yielding around 1.3%, compared against 1.199% at the end of last week. The Federal Reserve has vowed to keep benchmark interest rates at or near 0% for the foreseeable future as the economy contends with the impact of the epidemic but rapidly rising rates could impinge upon the central bank’s efforts some fear.

“That is going to be the story elsewhere, particularly in the US where if the market believes the Fed is making a mistake by keeping rates at zero for too long, the long end will respond and it has,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group in a daily research note.

The market’s attention was at least partially diverted on Thursday by a House Financial Services Committee hearing that sought to grill participants in the surge in shares of companies like GameStop Corp., but it isn’t clear what implications the hearing, which included the CEO from popular trading app Robinhood Markets and the head of hedge fund Citadel LLC, Ken Griffin, and owner of its market making arm Citadel Securities, will have on the infrastructure of the broader market.

Which stocks are in focus?
  • Shares of Deere & CoDE jumped 7% Friday morning, after the construction, agriculture and turf care equipment maker reported big profit and revenue beats for the fiscal first quarter, citing “improving conditions“ in the farm and construction sectors, and provided an upbeat full-year outlook. 
  • Six Flags Entertainment CorpSIX said Friday it was preparing to open all of its parks for the 2021 season, although the reopening dates are subject to change based on local and federal guidelines related to the COVID-19 pandemic. Shares were up 4.8%.
How are assets faring?
  • The yield on the 10-year Treasury note TMUBMUSD10Y gained 3 basis point to around 1.32% on Friday, putting it on track for its sharpest yield move in weeks. Bond prices move in the opposite direction of yields.
  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was off 0.4% and headed for a weekly slip of 0.3%.
  • Oil futures fell even as energy disruptions continued throughout the country, with the U.S. benchmark CL.1 falling 48 cents, or 0.8%, to trade at $60.05 a barrel on the New York Mercantile Exchange.
  • Gold futures GC00 rose $8.60, or 0.5%, turning higher from a morning slump, to trade at $1,783.50 an ounce, after snapping a four-session losing streak on Thursday.
  • The pan-European Stoxx 600 index SXXP was trading 0.6% higher and London’s FTSE 100 stock index UKX added 0.3%, even as the British pound GBPUSD, +0.31% breached a psychological level, changing hands at $1.40 for the first time since around 2018.
  • Markets in Hong Kong HSI closed 0.2% higher, while Japan’s Nikkei 225 index NIK shed 0.7%. China’s Shanghai Composite Index SHCOMP finished Friday up 0.6%, while the CSI 300 000300 picked up 0.2% to end the week.

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