U.S. Indexes Attempt to Rebound and Treasury Yields Advance

Barry Adams
18 Jan, 2024
New York City

Stocks on Wall Street attempted to rebound after back-to-back two days of selloff.

The S&P 500 index and the Nasdaq Composite edged higher by 0.2% in early trading, and Treasury yields inched higher.

Investors reassessed rate-cut possibilities after several policymakers stressed inflation is still too high and higher-for-longer rates may be needed to bring down inflation to the Fed's preferred target rate of 2%. 

Across the Atlantic, European Central Bank policymakers also stressed the need for a restrictive stance, according to the latest minutes of the meeting released Thursday.

The S&P 500 index and the Nasdaq dropped 0.6% in Wednesday's trading.

The yield on the 10-year Treasury note rose above 4.1% after retail sales were ahead of market expectations, stoking speculation that the Federal Reserve may hold rates steady.

The market has rallied nine weeks in a row since early November 2023 in the hopes that the Federal Reserve is likely to lower rates sooner than expected and that the first rate cut may start as early as March.

However, investors have been dialing down on those expectations after policymakers carried out concerted efforts in the last two weeks, suggesting that market enthusiasm may be misplaced.

 

Jobless Claims Show Persistent Tight Labor Market Conditions

Initial jobless claims for the week ending January 13 declined 16,000 to 187,000, the U.S. Department of Labor reported Thursday. 

Continuing claims fell by 26,000 to 1,806,000 in the previous week, suggesting persistent tight labor market conditions. 

The four-week moving average, which reduces week-to-week volatility, decreased by 4,750 to 203,250.

 

U.S. Indexes and Yields

The S&P 500 index increased 0.4% to 4,791.58, and the Nasdaq Composite rose 0.9% to 14,909.14.

The yield on 2-year Treasury notes increased to 4.33%. 10-year Treasury notes advanced to 4.09%, and 30-year Treasury bonds edged up to 4.32%.

WTI crude oil increased $0.20 to $72.76 a barrel, and natural gas prices decreased 5 cents to $2.81 a thermal unit.

Gold increased by $10.23 to $2,015.98 an ounce, and investors debated the future interest rate path.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 103.35.

 

U.S. Stock Movers

Discover Financial dropped 9.6% to $97.25 after the credit card company reported a higher net charge-off in its latest quarterly results.

Revenue in the fourth quarter increased 13% to $4.2 billion from $3.7 billion, net income declined 62% to $388 million from $1.0 billion, and diluted earnings per share dropped to $1.54 from $3.74 a year ago.

Total net charge-off jumped 198 basis points to 4.11%, reflecting "seasoning of recent vintages with higher delinquency trends."

Apple Inc. increased 2.2% to $186.64 after the stock received an upgrade to "buy" from "neutral" from Bank of America.

The bank said that the company is likely to benefit from a multi-year hardware upgrade cycle supported by generative AI features.

The bank sees more than 20% upside for the stock from the current price level.

Alcoa Inc. decreased 1.0% to $26.80 after the aluminum company reported a narrower-than-expected quarterly loss of 56 cents per share.

Sales in the fourth quarter were flat at $2.6 billion, net loss attributable to shareholders declined to $150 million from $350 million, and diluted loss per share fell to 84 cents from $2.24 a year ago.

Alumina production decreased 1% sequentially to 2.79 million metric tons on lower production from the Australian refineries.

In aluminum, Alcoa produced 541,000 metric tons, a 2% increase from the third quarter's strong output.