Read: The Nasdaq Composite just logged its 66th correction since 1971. Here’s what history says happens next to the stock market.
What’s driving markets
Stocks have struggled since the beginning of the year as bonds have sold off. The yield on the benchmark 10-year Treasury
TMUBMUSD10Y,
1.834%
has surged more than 30 basis points this year, hitting a two-year high earlier this week, while the 10-year German
TMBMKDE-10Y,
-0.032%
bund yield turned positive for the first time in three years on Wednesday.
Read: Stock-market warning signal: Here’s what surging bond yields say about S&P 500 returns in next 6 months
Michael Brown, senior market analyst at Caxton FX in London, said sentiment remains fragile.
“Selling pressure has been intense over the last couple of weeks, albeit slightly less so yesterday, and little on the fundamental side has shifted over the last 24 hours. As such, we cannot rule out any near-term gains being a ‘bear squeeze rally’, which may allow new shorts to soon enter the market, particularly if rates continue to tear higher,” said Brown.
The rise in yields was seen taking a bigger toll on growth stocks. Growth stock valuations are based on expectations for cash flow far into the future. When Treasury yields rise, the value of that future cash is discounted. Yields pulled back Wednesday and the 10-year rate was down 0.3 basis point at 1.827% Thursday morning.
See: At least 7 signs show the stock market is starting to break down
Investors continue to wade through corporate results, including airlines, as earnings season picks up steam.
In U.S. economic data Thursday, first-time jobless claims unexpectedly rose by 55,000 last week to 286,000, compared with expectations for 225,000, likely reflecting the effect of the spread of the omicron variant of the coronavirus that causes COVID-19.
The Philadelphia Fed’s manufacturing index rose to 23.2 in January from 15.4 in December.
Markets also are paying attention to geopolitical worries, with Russia stationing troops along the border of Ukraine. “My guess is he will move in. He has to do something,” said U.S. President Joe Biden of Russian President Vladimir Putin at a press conference on Wednesday.
Separately, the People’s Bank of China cut a key interest rate, as the Hang Seng
HSI,
+3.42%
surged more than 3%.
Which companies are in focus?
- United Airlines Holdings Inc.
UAL,
-0.97%
late Wednesday reported a smaller-than-expected quarterly loss and sales came in above Wall Street expectations, but said it was postponing capacity increases until later in the year due to omicron and that it now believes this year’s capacity will be lower than in 2019. Shares fell 0.4%. - Shares of American Airlines Group Inc.
AAL,
-0.69%
rose 0.6% after reporting a narrower-than-expected loss and better-than-expected revenue. - Shares of Travelers Cos. Inc.
TRV,
+4.46%
gained 3% after the insurer reported a big profit beat. - Casper Sleep Inc.
CSPR,
+10.82%
said shareholders approved its plan to be acquired by certain subsidiaries of Durational Consumer SPV IV, an investment vehicle managed by Durational Capital Management LP. Shares jumped more than 13%.
What are other assets doing?
- The ICE U.S. Dollar Index
DXY,
+0.05%,
a measure of the currency against a basket of six major rivals, was little changed. - Oil futures pulled back from a seven-year high, with the U.S. benchmark
CL.1,
-0.21%
down 0.2%. Gold futures
GC00,
+0.12%
ticked up 0.1%. - The Stoxx Europe 600
SXXP,
+0.29%
edged up 0.1%, while London’s FTSE 100
UKX,
-0.39%
fell 0.2%. - The Shanghai Composite
SHCOMP,
-0.09%
fell 0.1%, while Japan’s Nikkei 225
NIK,
+1.11%
rose 1.1%.
