U.S. stock benchmarks scored a turnaround Wednesday, ending higher for a second day, as technology stocks found a footing and signs of progress emerged in Washington on the debt ceiling debate.
Video: Wednesday 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, higher energy costs and the likelihood of tighter monetary policy from the Federal Reserve.
- The Dow Jones Industrial Average closed 102.37 points higher, or 0.3%, to end at 34,416.99, booking its best intraday comeback since Dec. 21, according to Dow Jones Market Data.
- The S&P 500 rose 17.83 points, or 0.4%, to close at 4,363.55.
- The Nasdaq Composite Index gained 68.08 points, or 0.5%, to finish at 14,501.91.
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 drove the market?
U.S. stocks staged a turnaround Wednesday, after trading lower early in the session, as investors wrestled with relatively upbeat jobs data, volatility in technology stocks and elevated 10-year Treasury yields.
“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 pulled back to 1.524% Wednesday after briefly climbing intraday to about 1.58%, its highest since June.
“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.
Energy stocks have received a boost from higher crude oil and natural gas prices recently as shortages disrupt economies in Europe and China. But Natural-gas futures fell 10% Wednesday, after Russian President Vladimir Putin said his country would boost supplies of the fuel to ease European shortages, a day after prices settled at their highest level since late 2008. U.S. oil futures also pulled back modestly, after posting their highest close in about seven years.
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
In U.S. economic data, 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%.
Which companies were in focus?
- Facebook Inc. shares gained 0.2% 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.
- CanaFarma Hemp Products Corp. shares plunged 12.5% after its co-founders were charged by securities regulators with fraudulently raising about $15 million from investors, and misappropriating a “significant portion” of the funds for personal use and other unrelated purposes.
- Shares of Palantir Technologies Inc. climbed1.6% after the data-software company said it won an $823 million Army contract.
- Shares of Camber Energy Inc. CEI tumbled 40.6% in active trading Wednesday, roughly shedding 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 56.7% 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 shed 0.8% and 0.5%, respectively, after they said a memorandum of understanding (MOU) had been signed to improve supplies of rare earth materials, magnets, copper and electrical steel used in making electric vehicles and renewable energy equipment.
How did other assets perform?
- Oil futures fell, with the U.S. benchmark down 1.9% to settle at $77.43 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