Market Snapshot: U.S. stocks drift lower after back-to-back Fed-inspired losses

What’s driving markets

Minutes from the March Federal Open Market Committee meeting, released Wednesday, showed the central bank weighing a plan to reduce its bond holdings by $95 billion per month as it tries to stamp out surging inflation. The Fed’s caution hit technology stocks in particular on Wednesday as their valuations are more dependent on the level of interest rates.

“It’s not surprising to see that growth names are leading the losses, given the well-known rate sensitivity of these megacap stocks, with the Nasdaq now almost 5% off recent highs,” said Michael Brown, head of market intelligence at Caxton. “While, near-term, I remain cautious on equities, I also think that these names are likely to outperform over the medium-term as economic activity slows and the market places a premium on growth.”

St. Louis Fed President James Bullard on Thursday dismissed talk of recession, saying that the U.S. expansion “is not ‘old’ and can continue for a long time.” Bullard has called for the Fed to raise interest rates swiftly to counter inflation, saying he wants to get the Fed’s benchmark interest rate above 3% this year.

See: Fed must ‘inflict more losses’ on stock-market investors to tame inflation, says former central banker

Rates analysts at Bank of America say the 10-year yield TMUBMUSD10Y, 2.649% could reach 3%, even though they see fair value in the 2.05% to 2.7% range. The yield was back on the rise after an early pullback Thursday, up more than a basis point at 2.618%.

The U.S. Labor Department said first-time jobless claims dropped by 5,000 to 166,000 in week ended April 12, the lowest since 1968.

The market may be due to steady somewhat as it gets on board with the Fed’s balance-sheet plans, said Mike Loewengart managing director of investment strategy at E-Trade, Morgan Stanley.

“If nothing else, the market is a fan of certainty, so clarity on that front is likely welcomed,” he said, in emailed comments. “And while the Fed is fighting its battle against inflation, todays weekly jobless claims read is case in point that the labor market is thriving and one less thing on the Fed’s plate. The read also gives some wind underneath the Fed’s wings to aggressively fight inflation without fear of imminent recession.”

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Which companies are in focus?

• Shares of HP Inc. HPQ, +16.24% jumped 15% after Warren Buffett’s Berkshire Hathaway Inc. BRK.A, -0.00% BRKB, -0.36% disclosed that it had taken an 11% stake in the maker of personal computers.
• After an extension of the federal student loan moratorium, SoFi Technologies Inc. SOFI, -12.35% trimmed its outlook for the full fiscal year Wednesday, with executives now assuming the moratorium will last at least through the rest of the year. Shares were down 11.5%.
• Shares of Levi Strauss & Co. LEVI, -4.43% fell 5.2% after the retailer late Wednesday reported quarterly earnings and sales that topped Wall Street forecasts.
• Shares of ConAgra Brands Inc. CAG, +0.26% were up 0.4% after the food company delivered disappointing guidance.
• Rite Aid Corp. RAD, -24.11% shares plunged 24% after Deutsche Bank analyst George Hill cut his rating on the stock to sell from hold, slashing his price target to $1 from $16.

What other assets are doing

• The ICE U.S. Dollar Index DXY, +0.12% rose 0.1%.
• Bitcoin BTCUSD, -1.01% edged down 0.1% to trade above $43,300.
• Oil futures gave up early gains, with the U.S. benchmark CL.1, -2.40% down 1.4% below $95 a barrel, while gold futures GC00, +0.72% rose 0.6% to trade above $1,935 an ounce.
• The Stoxx Europe 600 SXXP, -0.21% edged down 0.2%, while London’s FTSE 100 UKX, -0.47% lost 0.5%.
• Stocks fell in Asia, with the Shanghai Composite SHCOMP, -1.42% ending 1.4% lower, while the Hang Seng Index HSI, -1.23% lost 1.2% in Hong Kong and Japan’s Nikkei 225 NIK, -1.69% declined 1.7%.