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Dow Futures, Nasdaq Turn Higher As Bond Markets Steady; Weekly Jobless Claims Rise to 745,000

The Nasdaq is nearing a 10% slump from its February 12 high as bond yields resume their recent climb amid bets on a faster COVID recovery and accelerating inflation concerns.

The Thursday Market Minute

  • Global stocks extend retreat as markets key on U.S. Treasury bond yields following yesterday's leap in inflation expectations.
  • Benchmark 10-year notes trade at 1.491% overnight as market expectations for near-term inflation hit the highest levels since 2008.
  • Fed Chair Jerome Powell speaks to a Wall Street Journal jobs event later today, with markets looking for any signal of concern for the recent rise in U.S. borrowing costs. 
  • CDC data shows 80.5 million coronavirus vaccine doses have been administered as of yesterday, a pace of more than 2 million per day against a new case rate of around 40,000.
  • Oil slips lower ahead of today's OPEC+ meeting and yesterday's record 21 million barrel increase in domestic crude stocks reported by the Energy Department.
  • U.S. equity futures suggest flat open on Wall Street after weekly jobless claims data and ahead of Powell's remarks to a Wall Street Journal event at noon Eastern time.

U.S. equity futures  turned higher Thursday as investors continued to track the steady increase in government bond yields ahead of weekly jobless claims data and a key speech from Federal Reserve Chairman Jerome Powell later in the session.

Powell's comments to the Wall Street Journal Jobs Summit just after noon eastern time could prove crucial for a stock market that has been acutely sensitive to the recent surge in bond yields and accelerating inflation expectations linked to President Joe Biden's $1.9 trillion stimulus bill and the ongoing progress in the U.S. vaccine rollout.

A reading of service sector activity for the month of February yesterday indicated the highest "prices paid" component for American businesses in more than a decade, while the so-called breakeven rate between five-year Treasury bonds and five-year inflation-protected securities, a key market gauge for inflation, hit a 2008 high of 2.5% and now sits firmly ahead of the Fed's 2% inflation target.

Benchmark 10-year Treasury bond yields traded as high as 1.491% in overnight dealing but eased to 1.479% after a weaker-than-expected reading of weekly jobless claims, which jumped 9,000 to 745,000 for the week ending on February 27.

Futures contracts tied to the Dow Jones Industrial Average suggesting a 75 point opening bell gain while those linked to the S&P 500, which has fallen for four of the past five days, is priced for a 4 point uptick.

Tech stocks, which have borne the brunt of the recent bond yield surge, are set for another session of declines, as well, with contracts tied to the Nasdaq indicating a 20 point gain. 

Investors will also be focused on OPEC and its monthly meeting in Vienna later today, where cartel members, as well as allies such as Russia, will decide to either deeper, maintain or ease production cuts that are taking 9.2 million barrels from the market each day.

Overnight oil prices were modestly lower, however, following a record 21 million barrel increase in domestic crude supplies reported by the Energy Department for the week ending February 26 as refineries remained shuttered during the worst of the Texas winter storms.

WTI contracts for April delivery were marked 57 cents lower from their Wednesday close at $60.71 per barrel while Brent contracts for May delivery, the benchmark for global prices, fell 51 cents to $63.55 per barrel.

In overnight trading, European stocks tracked U.S. equity futures in the opening hours, with the Stoxx 600 falling 0.8% despite a move from the German government to gradually ease coronavirus-lead restrictions on households and businesses over the coming week. Britain's FTSE 100 was marked 1% lower as commodity prices eased in the wake of a firmer U.S. dollar. 

Asia stocks, too, were notably in the red, with the Nikkei 225 ending 2.13% lower at 28,930.11 and the region-wide MSCI ex-Japan index slumping 2.05% heading into the final hours of trading.