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Tech Resumes Tumble As Bond Yields Rise on Inflation Bets, Dow Eyes 32,000; Jobless Claims Fall to 730,000

The Dow could top 32,000 for the first time Thursday as oil and commodity prices extend gains amid bets on firm vaccine-related recovery over the second half of the year.

The Thursday Market Minute

  • Global stocks edged higher, with solid gains in Asia and a muted start in Europe, as growth and earnings prospects offset inflation concerns.
  • Fed Chairman Jerome Powell's assurances on low rates and extended bond buys stoke stock bulls, but fail to convince fixed income investors.
  • Benchmark 10-year Treasury note yields, which briefly snuffed out yesterday's rally, rise to a fresh 52-week high of 1.468% in overnight trading.
  • GameStop surges another 50% in pre-market trading as the original 'Reddit stonk' resumes its mystifying ride.
  • Oil prices hold past 52-week highs after Energy Department data Wednesday showed a record drop in domestic production last week linked to the Texas deep freeze.
  • U.S. equity futures suggest mixed open Thursday ahead of fourth quarter earnings from Best Buy and Moderna as well as weekly jobless claims and a second reading of fourth quarter GDP at 8:30 am Eastern time.

Wall Street futures traded mixed Thursday, with tech stocks looking at their third down day of the week, as market interest rates continue to edge higher despite dovish assurances from the Federal Reserve. 

Around 730,000 Americans filed for unemployment benefits last week, the Labor Department said, down from 841,000 over the previous period and well inside the Street consensus forecast of 838,000. A second reading of U.S. GDP showed a 4.1% growth for the final three months of last year, just up from the initial estimate of 4%.

Chairman Jerome Powell wrapped-up two days of testimony on Capitol Hill yesterday during which he repeated his view that record low interest rates and billions in monthly bond purchases would remain in place, perhaps for years, as the economy slowly recovery from its year-long pandemic hit. 

Bond markets largely ignored his messaging yesterday, however, taking the yield on benchmark 10-year Treasury notes to a 13-month high of 1.43%, a move that was extended in overnight trading to 1.468% even as the U.S. dollar index fell to an early January low of 89.753 against a basket of its global peers.

Higher market rates will likely continue to pressure tech stocks Thursday, but the underlying improvement in both vaccine rollouts broader economic strength should provide some upside for the Dow Jones Industrial Average, which closed at a record high 31,961.86 points last night. 

Data from the Centers for Disease Control indicate that some 66.5 million vaccine doses have been administered as of Wednesday, and with Johnson & Johnson  (JNJ) - Get Johnson & Johnson Report getting an early nod from the FDA ahead of its emergency use hearing on Friday, more supply will accelerate those numbers in the months ahead. 

Commodity prices, too, are pointing to a firm economic rebound over the second half of the year, with copper trading at a nine-and-a-half year high and oil testing the highest levels in early two years. 

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Still, with weekly jobless claims set for release at 8:30 am Eastern time, and bond yield inching higher as inflation expectations continue to jump, Wall Street is looking at a bumpy start to the Thursday trading session, with contracts tied to the Dow indicating a modest 5 point opening bell gain and those linked to the S&P 500 priced for an 12 point pullback.

The Nasdaq Composite, which is up 5.5% for the year, is set for a 110 point pullback.

Another factor in the market's reticence this morning could be the late Wednesday surge -- and the overnight extension -- in GameStop  (GME) - Get GameStop Corporation Report, the original stock of the r/Wallstreetbets sub-Reddit that triggered historic volatility earlier this month when it soared to a record high of $483 per share.

GameStop, which rose more than 100% on Wednesday, was marked 50% higher in pre-market trading at $136 per share and was notable active in overnight trading in Frankfurt. 

European stocks, in fact, were marked marginally higher Thursday even as the euro jumped to a multi-month high of 1.2228 against the weakened dollar, with the Stoxx 600 rising 0.14%. Britain's FTSE 100 added 0.4% in early London dealing.

Overnight in Asia, the Nikkei 225 in Tokyo reclaimed the 30,000 yen barrier with a 1.67% gain the pegged the benchmark at 30,167.27 points, while the region-wide MSCI ex-Japan index was marked 1.56%  higher as it headed towards the close.

U.S. oil prices rode a weaker U.S. dollar, as well as Wednesday's Energy Depart report showing a record fall in domestic production linked to last week's deep freeze in Texas, to the highest in nearly two years in early European trading.

WTI crude futures for April delivery, the benchmark for U.S. oil and gas prices, were marked 24 cents higher on the session at $63.46 per barrel while Brent crude contracts for the same month, which are more tightly-aligned to global prices, rose 34 cents per barrel to $67.38.