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Stocks Set for Muted Open After Dow Notches Another Record

U.S. stocks set for a muted open amid a broader transition away from tech and into sectors that stand to benefit from an economic recovery, and can withstand higher rates.

U.S. stock futures were slightly lower Wednesday morning after the Dow Jones Industrial Average notched another record close amid a broader transition away from tech stocks and into energy, industrials and other sectors that stand to benefit from a broader economic recovery.

Futures contracts tied to the Dow Jones Industrial Average are indicating a 32-point opening dip, while those linked to the S&P 500 are priced for a 0.75-point increase. Futures tied to the tech-focused Nasdaq Composite are indicating a 33.25-point drop at the start of trading as benchmark 10-year Treasury note yields trading down slightly at 1.642%.

In commodity markets, Brent crude, the international oil benchmark, inched up less than 0.1% to $80.01 a barrel. On Tuesday, oil prices surged after the Organization of the Petroleum Exporting Countries and a coalition of Russia-led oil producers agreed to continue pumping more crude.

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While the Dow climbed 200 points to a new high Tuesday, the tech-focused Nasdaq Composite suffered a selloff, falling 1.3% amid a rapid rise in Treasury yields, sparking talk of a broader rotation out of tech and into areas like energy, industrials and banking that perform better in higher-yield environments.

Ford  (F) - Get Ford Motor Company Report, General Motors  (GM) - Get General Motors Company Report and Occidental Petroleum  (OXY) - Get Occidental Petroleum Corporation Report were among the top movers Wednesday morning. On the flip side, shares of Tesla  (TSLA) - Get Tesla Inc Report, Peloton Interactive  (PTON) - Get Peloton Interactive, Inc. Class A Report, Advanced Micro Devices  (AMD) - Get Advanced Micro Devices, Inc. Report and Workday  (WDAY) - Get Workday, Inc. Class A Report were all lower as investors continued to re-assess companies' longer-term prospects as the economy normalizes, particularly in a higher-rate and tighter policy environment.

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The closely-watched benchmark 10-year Treasury yield was as high as 1.71% Tuesday, triggering selling in growth-oriented technology stocks.

One outlier was Beyond Meat  (BYND) - Get Beyond Meat, Inc. Report, whose shares were up nearly 9% in premarket trading after the plant-based meat-substitute maker said it is teaming up with Yum! Brands’  (YUM) - Get Yum! Brands, Inc. Report KFC to roll out Beyond Fried Chicken.

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Purchasing managers’ surveys on the manufacturing sector for December are slated to be released at 10 a.m. ET. Economists expect a slowdown in growth, forecasting that supply-chain issues may have constrained U.S. factories.

Investors will be keeping an eye out for the Federal Reserve’s minutes from its December meeting, to be released at 2 p.m. ET on Wednesday. The central bank announced it would speed up the tapering of its bond buying program. The Fed has also forecast three interest rate hikes for 2022.

On the data front, ADP will release its private payroll report for December with economists polled by Dow Jones estimating a total of 375,000 jobs added. The Labor Department will release its non-farm payrolls report for December on Friday. 

Economists polled by FactSet currently expect that 405,000 new jobs were added to the economy last month. The U.S. added 210,000 non-farm payrolls in November versus the consensus estimate of 573,000 jobs.

Some 4.5 million people quit their jobs in November amid what has been called the Great Resignation amid a shortage of workers vs. positions required. The largest quit increases came in accommodation and food services (159,000); health care and social assistance (52,000); and transportation, warehousing, and utilities (33,000).