Dow Jones futures fell slightly early Thursday, while S&P 500 futures fell solidly and Nasdaq futures plummeted, with 10-year Treasury yields rising above 1.7% for the first time since January 2020. This is amid concerns that the Federal Reserve and other central banks will let inflation rise too quickly.
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This is a reversal from Wednesday, when a political statement from the Fed meeting and comments from Fed chief Jerome Powell spurred a recovery in the stock market. The Dow Jones broke a record, while the Nasdaq reversed upward, with Treasury yields reducing sharp gains.
Williams-Sonoma (WSM), Five below (Five and Upstart Holdings (UPST) highlighted the main gains after closing. About that, Translate biography (TBIO) and Lordstown Motors (RIDE) also changed the news.
Increase in treasury yields
The 10-year Treasury yield jumped 10 basis points to 1.74%, as the second day’s reaction to the Fed meeting was very different from Wednesday’s. On Wednesday, the Federal Reserve signaled that it will not initiate rate hikes before 2024, unchanged from before. Fed chief Jerome Powell said it was not the time to talk about reducing large purchases of central bank assets.
This is despite more optimistic economic forecasts, as restrictions on coronavirus ease and stimulus checks come out of the new $ 1.9 trillion spending package.
The Fed predicts inflation of 2.4% this year, but cooling to 2% in 2022. The Fed has an inflation target of 2%, but says that it is okay with price increases above that level for a short period of time .
The 10-year Treasury yield reached 1.69% before the Fed meeting was announced. The 10-year yield ended up rising 2 basis points to 1.64%, slightly below what it was before the Fed’s 14:00 announcement.
But while the Fed’s calm over inflation calmed investors on Wednesday, it did not last long.
If the Fed is not concerned about inflation, bond brokers will. With high commodity prices and US retail gasoline prices now on the rise for 46 consecutive days, some underlying inflationary pressures are bubbling up.
Dow Jones Futures Today
Dow Jones futures were slightly below fair value after rising most of the morning. S&P 500 futures fell 0.7%. Nasdaq 100 futures plunged 1.7%. This suggests that the Nasdaq compound will test its 50-day moving average again.
Keep in mind that overnight action on Dow futures and elsewhere does not necessarily translate into real trading in the next regular stock market session.
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Coronavirus News
Coronavirus cases worldwide reached 121.93 million. Deaths from Covid-19 reached 2.69 million.
Coronavirus cases in the US reached 30.29 million, with deaths above 550,000.
Stock market rally today
Overview of the US stock market today |
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|---|---|---|---|---|
| Index | Symbol | Price | Gain / Loss | % Change |
| Dow Jones | (0DJIA) | 33016.16 | +190.21 | +0.58 |
| S&P 500 | (0S and P5) | 3974.16 | +11.45 | +0.29 |
| Nasdaq | (0NDQC) | 13525.20 | +53.63 | +0.40 |
| Russell 2000 | (IWM) | 232.37 | +1.87 | +0.81 |
| IBD 50 | (FFTY) | 47.63 | +0.42 | +0.89 |
Last updated: 4:22 PM ET 3/17/2021 |
||||
The stock market recovery was traded mixed to fall for much of the session, before the major indices rebounded together after the Fed and Powell meeting.
The Dow Jones Industrial Average rose 0.6% in Wednesday’s stock market trading. The S&P 500 index advanced 0.3%. The Nasdaq compound rose 0.4% after falling almost 1.5% during the day.
The 10-year Treasury yield, which jumped to a 13-month high of 1.69%, reduced earnings to 1.64%.
Among the best ETFs, Innovator IBD 50 ETF (FFTY) was up 0.9%, while Innovator IBD Breakout Opportunities ETF (BOUT) was up 1.3%. The iShares Expanded Tech-Software Sector (IGV) ETF fell 0.2%. The VanEck Vectors Semiconductor (SMH) ETF advanced 0.9%.
Reflecting more speculative story stocks, Ark Innovation ETF rose 0.75% and Ark Genomics ETF 1.1%. But the two ARK ETFs fell by almost 2% in pre-market trade, as Tesla (TSLA) and many other highly valued holdings retreat with spikes in Treasury yields.
Main earnings
Williams-Sonoma reported better-than-expected gains and a third consecutive quarter of accelerated revenue growth. The luxury furniture and household goods retailer reported same-store growth of over 20% across all of its chains. Williams-Sonoma also announced a $ 1 billion repurchase and an 11% increase in dividends.
WSM shares rose 11% in pre-market trading, signaling a move above 151.26 points to purchase a seven-week cup base, according to analysis by the MarketSmith chart. Williams Sonoma also has an early entry of 140.24 from a loop that is too low at the base to be valid.
The WSM stock is part of the IBD 50.
The Five Below earnings also outperformed, while the guidelines were well above the views. CINCO’s shares surged 5% on Thursday, going from a flat-base purchase point of 198.20 to a base-to-base pattern.
Upstart Holdings easily outperformed EPS views, but revenue was slightly lost. The AI lending platform was higher. Upstart also announced that it will buy Prodigy, an automotive retail software maker. UPST’s shares soared 41% on Thursday. This will send Upstart’s stock well above its 50-day line, but still below its February 11 peak of 105.58.
Technically, Lordstown Motors reported earnings, but the EV pickup startup has essentially zero revenue. Lordstown said his Endurance pickup will start production in September, with the first beta vehicles ready for testing later this month. An electric van is expected to start production in late 2022. But Lordstown also released an SEC investigation. This happened after Hindenburg Research accused Lordstown of fraud. RIDE shares, which plunged last week in the Hindenburg report, fell 5% before opening.
Finally, Translate Bio reported poor results for his treatment of cystic fibrosis. TBIO’s shares plunged 28% in pre-market trading. Translate Bio’s shares maintained their lines for 21 and 50 days.
Bullish stock market analysis
The Fed’s decision and comments by Fed Powell chief gave a much needed boost. Nasdaq was reducing the 50-day line on Wednesday and testing its 21 days, before recovering with the policy statement and Powell. Some big 2020 winners, like CrowdStrike (CRWD) and Twilio (TWLO) has recovered from its 50-day tests. Meanwhile, some recent disruptions and actions showing advance purchases have strengthened, including MKS Instruments (MKSI), Westlake Chemical (WLK) and 5G chip maker Qorvo (QRVO).
But, as Nasdaq futures show today, the stock market recovery remains sensitive to Treasury yields, especially growth names. All of Wednesday’s earnings, plus a few more, can be undone. The technology sector remains a work in progress. If Nasdaq’s compound falls below the 50-day line and continues to sell, technology stocks will come under severe pressure.
Meanwhile, the reopening moves made big moves. Many are above pre-coronavirus levels, although gains are likely to be well below pre-pandemic reports. So don’t get too excited.
Focus on stocks that are trading above the 21- and 50-day moving averages.
Read The Big Picture every day to stay in sync with the direction of the market and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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