U.S. stock benchmarks turned modestly higher Wednesday afternoon, as technology stocks found a footing, while there were signs of progress in Washington on the debt ceiling debate.
Video: Tuesday Market Selloff: Why Energy Crisis, Inflation Fear Are Driving Stocks (TheStreet)
Investors also have been fixated on bond yields, with the 10-year Treasury note near 1.5% on fears about inflation and the likelihood of tighter monetary policy from the Federal Reserve.
- The Dow Jones Industrial Average rose 35 points, or 1%, to 34,347, turning positive in afternoon trade.
- The S&P 500 edged 8 points higher, or 0.2%, to 4,352.
- The Nasdaq Composite Index traded 52 points higher, or 0.4%, to reach 14,488.
On Tuesday, the Dow Jones Industrial Average rose 312 points, or 0.92%, to 34315, the S&P 500 increased 45 points, or 1.05%, to 4346, and the Nasdaq Composite gained 178 points, or 1.25%, to 14434.
What’s driving the market?
U.S. stocks recouped some of their early losses Wednesday afternoon, as investors wrestled with relatively upbeat jobs data, elevated 10-year Treasury yields and how further technology stocks might need to fall before finding a bottom.
“At 1.5%, people start to sit up and take notice,” said Robert Pavlik, a senior portfolio manager at Dakota Wealth Management, about the 10-year Treasury rate’s recent sharp rise, in a phone interview.
The 10-year Treasury note BX:TMUBMUSD10Y briefly rose Wednesday to around 1.57% before modestly pulling back 1.52%.
“But it’s really a continuation of the unsettling news around interest rates and higher energy prices, and what that’s going to mean for certain groups of stocks, including the tech space,” Pavlik said.
“Some tech names are in the process of finding a bottom, which is the first step in turning this around,” he said, adding that the S&P 500 might still need to decline 1% to 1.5% before finding a bottom, but that the Technology Select Sector SPDR ETF could need to fall even further.
Technology stocks have been under pressure lately, as rising yields can be a negative for shares of fast-growing companies as they make those future cash flows appear less valuable.
On the debt-ceiling front, President Joe Biden kept pressure on lawmakers to raise the U.S. borrowing limit, telling CEO of top U.S. businesses on Wednesday that an American default would “lead to self-inflicted wounds that risk the market tanking and wiping out retirement savings and costing jobs.”
Meanwhile, Senate Minority Leader Mitch McConnell on Wednesday made a new offer to the Democratic-run Senate as lawmakers struggled to end a standoff over the federal borrowing limit.
A report from Automatic Data Processing Inc. showed that 568,000 private-sector jobs were created in September, outpacing estimates from The Wall Street Journal for 425,000. However, a reading for August was reduced to 340,000 from 374,000.
Still, the labor-market report, coming ahead of the more closely followed nonfarm payrolls report due Friday from the Labor Department, may be sufficient to meet the Federal Reserve’s criteria for “substantial further progress” as the central bank looks ready to taper its monthly purchases of Treasurys and mortgage-backed securities as the economy recovers from the COVID-19 pandemic.
Mike Loewengart, managing director at E-Trade Financial, told MarketWatch via email that “given the backdrop of uncertainty we’re facing on a number of fronts, investors could be reading into the potential effect that a positive jobs read will have on Fed policy, as opposed to what it means for where we stand in terms of economic recovery.”
“Bottom line is there are a number of factors likely contributing to market moves in this relatively volatile environment. So the ADP read is really just one piece of the puzzle, and historically hasn’t always stacked up as a proxy for the full jobs report we’ll get later in the week,” Loewengart said.
Economists expect the economy added a net 500,000 jobs in September, up from the disappointing 235,000 jobs added in August, according to a Wall Street Journal poll. The unemployment rate is expected to tick down to 5.1% from 5.2%.
Some investors also were seeking haven in the U.S. dollar, which rose 0.3% on Wednesday, as measured by the ICE U.S. Dollar Index
Natural-gas futures tapped fresh record prices on Wednesday in the U.K. and Europe, but were seen pulling back substantively on reports of increased supplies from Russia.
Which companies are in focus?
- Facebook Inc. shares edged 0.5% higher after the Wall Street Journal reported that it slowed the rollout of new products in recent days, people familiar with the matter said, as media reports and congressional hearings related to a trove of internal documents show harms from its platforms.
- Shares of Palantir Technologies Inc. climbed 2.4% after the data-software company said it won an $823 million Army contract.
- Shares of Camber Energy Inc. CEI tumbled 26% in active trading Wednesday morning, putting them on track to shed more than two-thirds of their value in four days.
- Office Depot has announced its “20 Minute Pickup Promise,” which will make orders placed on the retailer’s website or mobile app available for in-store or curbside pickup in 20 minutes or the customer will receive a discount on their next qualifying purchase.
- Allbirds Inc. has shifted the language on its sustainability framework in the latest amendment to its IPO prospectus.
- Shares of Voyager Therapeutics Inc. VYGR rocketed 57% higher Wednesday, after closing at a record low in the previous session, as the gene-therapy company announced a license option agreement with Pfizer Inc. PFE that could valued at more than $600 million.
- General Motors Co. GM and General Electric Co. GE said Wednesday that they signed a memorandum of understanding (MOU) to improve supplies of rare earth materials, magnets, copper and electrical steel used in making electric vehicles and renewable energy equipment.
How are other assets trading?
- Oil futures fell, with the U.S. benchmark down 2% to $77.35 a barrel. Gold futures closed 0.05% lower to settle at $1,761.80 an ounce.
- In Europe, the Stoxx Europe 600 finished 1% lower, while London’s FTSE 100 dropped 1.2%.
- The Hang Seng Index closed down 0.5% in Hong Kong, while Japan’s Nikkei 225 dropped 1%. Markets in China remain closed for a holiday.
Barbara Kollmeyer contributed reporting