Stocks Lower as Recent Rate Moves Remain Top of Mind…..

U.S. equities closed lower on the day, though managed to claw back some earlier losses, as the markets remained wary of the implications of the recent moves in the interest rate markets. Aside from the caution stemming from the recent spike in yields, stocks were also hampered by a range of mixed, but largely uninspiring economic and corporate earnings reports. A busy economic agenda showed initial jobless claims surprisingly accelerated, housing starts fell much more than expected, and import prices were hotter than forecasted, while building permits unexpectedly jumped and regional manufacturing activity growth topped estimates. On the earnings front, Dow member Walmart missed earnings estimates and offered tepid guidance as shares fell, while Twilio rallied on its more upbeat earnings report. Treasuries saw some pressure as yields ticked higher, amid a backdrop offering signs of rising inflation, the expectation of further fiscal support, and a highly accommodative monetary policy. The U.S. dollar, crude oil, and gold were all lower. Asia finished mostly lower, but China returned from the long Lunar New Year holiday in modestly positive fashion, and Europe closed down.

The Dow Jones Industrial Average fell 120 points (0.4%) to 31,493, the S&P 500 Index was down 17 points (0.4%) at 3,914, and the Nasdaq Composite lost 100 points (0.7%) to 13,865. In moderate volume, 941 million shares were traded on the NYSE and 6.4 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.63 to $60.53 per barrel. Elsewhere, the Bloomberg gold spot price fell $1.33 to $1,774.80 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% lower at 90.56.

Jobless claims surprisingly rise, housing construction data mixed, regional manufacturing strong…..

Weekly initial jobless claims came in at a level of 861,000 for the week ended February 13, above the Bloomberg estimate of 773,000, and compared to the prior week’s upwardly revised 848,000 level. The four-week moving average declined by 3,500 to 833,250, and continuing claims for the week ended February 6 decreased by 64,000 to 4,494,000, south of estimates of 4,425,000. The four-week moving average of continuing claims fell by 120,250 to 4,632,000.

Housing starts for January dropped 6.0% month-over-month (m/m) to an annual pace of 1,580,000 units, below forecasts of 1,660,000 units, and compared to December’s upwardly revised pace of 1,680,000 units. However, building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, unexpectedly jumped, climbing 10.4% m/m at an annual rate of 1,881,000, well above expectations of 1,680,000 units, and compared to the unrevised 1,709,000 unit pace in December.

The Philly Fed Manufacturing Business Outlook Index dipped by a smaller amount than expected and remained solidly in expansion territory (a reading above zero) for February. The index declined to 23.1 versus estimates to fall to 20.0 from January’s 26.5 level. Growth in new orders and shipments both decelerated but employment expanded at a faster pace.

The Import Price Index rose 1.4% m/m for January, versus expectations to match December’s upwardly revised 1.0% increase. Versus last year, prices were up by 0.9%, compared to forecasts of a 0.4% increase and December’s unadjusted 0.3% dip.

Treasuries were lower as the recent choppiness continued in the wake of Tuesday’s drop, and as recent economic data suggests inflation is showing signs of heating up, while retail sales jumped. The rate on the 2-year note was little changed at 0.11%, while the yield on the 10-year note gained 2 basis points (bp) to 1.29% and the 30-year bond rate increased 4 bps to 2.08%.

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