The latest Federal Open Market Committee minutes will be in the spotlight along with other economic indicators.
Karen Bleier/AFP/Getty ImagesStocks slid in the last trading day before the Thanksgiving holiday, as claims for first-time unemployment benefits fell to their lowest level since 1969. Markets are increasingly reflecting expectations that the Federal Reserve will reduce support from markets and the economy.
Shortly after the open, the Dow Jones Industrial Average was down 126 points, or 0.4%. The index climbed 194 points Tuesday. The S&P 500 and Nasdaq Composite declined 0.4% and 0.7%, respectively.
Jobless claims fell to 199,000, the lowest level for initial claims since Nov. 15, 1969, according to the Department of Labor, and far better than the expected 260,000. That continues a trend of strength in the labor market.
After the jobless claims result, markets began reflecting even higher chances that the Fed will speed up the pace of tightening monetary policy. The 2-year Treasury yield rose to as high as 0.65% from 0.61% before the data was released.
The 10-year Treasury yield rose to as high as 1.69% from 1.66% before the data. That signifies traders see the Fed potentially reducing the size of its bond program faster, which would drag down bond prices, lifting their yields.
The impact on the stock market is that household and business borrowing becomes harder, potentially slowing economic growth. For some companies, a higher yield on long-dated government bonds drastically reduces their valuations because higher bond yields make future profits less valuable.
Inflation data didn’t do much to change the market’s view. The Core Personal Consumption Expenditures Index, a key inflation measure the Fed tracks, rose 4.1% year-over-year in October, in line with estimates and higher than the previous reading of 3.7%.
Personal spending rose 1.3% month-over-month in October, higher than the expected 1% rise. Inflation, for the moment, isn’t dissuading consumers from spending as households still have a stockpile of cash partly resulting from economic stimulus.
But overall, all of the the economic data is seen as “inflationary,” which carries strong implications for Fed policy changes.
Elsewhere, durable goods orders fell 0.5% month-over-month in October, worse than the consensus economist forecast of a 0.3% rise. It’s widely expected that consumers will shift from buying more services and fewer goods, which were in favor when households stocked up during the pandemic.
The Nasdaq is down more than 2% from its Friday close. The 10-year Treasury yield has popped in that time, which weighs the most on expensive tech stocks because many tech companies are expecting a large share of their profits to come many years down the line.
Here are five stocks on the move Wednesday:
Gap (ticker: GPS) plunged more than 23% after the clothing retailer failed to meet expectations for quarterly results and slashed its full-year outlook.
Another clothing retailer, Nordstrom (JWN), was down 29% after its results also failed to impress, and it outlined higher labor costs and supply-chain issues.
Autodesk (ADSK) was down 16%. The software group’s sales and earnings met expectations, but its outlook disappointed the market.
Pure Storage (PSTG) stock gained 11% after the company reported a profit of 22 cents a share, beating estimates of 12 cents a share, on sales of $563 million, above expectations for $531 million.
Anaplan (PLAN) stock dropped 21% after the company reported a loss of 9 cents a share, narrower than the analyst estimate of a 14 cents loss, on sales of $144.3 million, above expectations for $133.8 million.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
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November 24, 2021 at 09:43PM
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Stock Market Today: Dow Slips, Oil Steadies, Gap and Nordstrom Plunge - Barron's
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