Wednesday March 10th

10-03-2021

Stock futures jump after report shows tame inflation, Dow futures climb 170 points

U.S. stock index futures jumped on Wednesday after a report showed tame inflation, easing worries about rising prices that has jolted yields higher and unnerved equity investors. Futures on the Dow Jones Industrial Average gained 170 points, or 0.5%. S&P 500 futures added 0.4%. Futures on the tech-heavy Nasdaq 100 rebounded into the green, climbing 0.7%. Data out Wednesday morning showed February consumer prices increased 0.4%, equal with what economists polled by Dow Jones were expecting. The Consumer Price Index gained 1.7% on a year-over-year basis, also within expectations. “The biggest concern that markets have had over the last month or so has been inflation running hotter than we estimate, clearly CPI puts that to rest, at least for today,” said Art Hogan of National Securities. “The yield on the 10-year has ceased going parabolic.” Investors will also be watching Wednesday’s 10-year Treasury auction of $38 billion in notes at 1 p.m. ET for clues into the next direction for rates. House Democrats are on track to pass the $1.9 trillion stimulus bill Wednesday morning. President Joe Biden is expected to sign the bill this weekend and checks of up to $1,400 should start going out this month. The anticipated stimulus and rise in rates has divided the market recently, largely favoring stocks leveraged to a recovering economy over the tech and growth stocks that led during the pandemic. On Tuesday however, tech stocks snapped back. The Nasdaq Composite climbed 3.7% to post its best day since November as investors poured back into popular growth names. Tesla surged 19.6% for its biggest one-day pop since February 2020. Apple and Facebook popped more than 4% each, while Amazon rallied 3.8%. Before the snapback, the tech-heavy benchmark had fallen into correction territory on Monday, or down more than 10% from its recent high. Tech stocks continued their comeback Wednesday morning following the tame inflation data. Higher rates have raised concerns about valuations for tech stocks. Tesla jumped another 2% in Wednesday’s premarket. Zoom Video was also higher. “Corrections ... create natural inflection points for traders,” said Chris Larkin, managing director of trading and investing product at E-Trade Financial. “Let’s not forget that less than a year ago traders interpreted one of the biggest negative macro events in market history as a buying opportunity, so there’s little reason to think otherwise given all the positive signals around us today.” The bounce in tech coincided with a decline in bond yields. The 10-year Treasury yield slid more than 5 basis points to 1.54% after trading as high as 1.62% on Monday. The 10-year was at about 1.56% early Wednesday, unchanged following the inflation data. Asia-Pacific markets traded mixed as stocks in Australia, Japan and South Korea struggled to hold onto earlier gains. Investors overnight returned to risky assets, confident that a massive U.S. stimulus package will soon be approved. The Nikkei 225 gave up early gains to close near flat at 29,036.56 and the Topix index rose 0.11% to end at 1,919.74. South Korea’s Kospi pulled back gains of more than 1% after market open and finished lower by 0.6%, or down 18 points at 2,958.12 while the Kosdaq fell 0.7%, or 6.29 points, to 890.07. Chinese mainland shares were mixed: The Shanghai composite finished near flat at 3,357.74 while the Shenzhen component rose 0.65%, or 87.62 points, to 13,563.34. In Hong Kong, the Hang Seng index rose 0.35% in late-afternoon trade while shares in Indonesia, Malaysia and India traded higher. Oil prices rose on Wednesday, supported by an OECD forecast for on global economic recovery and by OPEC+ oil output curbs, though gains were capped by rising U.S. inventories. Brent crude rose 66 cents, or 1%, to $68.18 per barrel and U.S. West Texas Intermediate crude rose 68 cents, or 1.06%, to $64.70 per barrel. Gold edged lower on Wednesday after registering its biggest jump in two months in the last session, as higher U.S. Treasury yields and a buoyant dollar remained a stumbling block for bullion. Spot gold eased 0.1% to $1,714.23 per ounce after rising more than 2% on Tuesday. U.S. gold futures fell 0.3% to $1,711.70. U.S. yields regained momentum on Wednesday, raising the opportunity cost of holding bullion while the dollar also rose.