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Rising Treasury yields fuel market weakness
25-Feb-21 16:20 ET
Dow -559.85 at 31402.01, Nasdaq -478.54 at 13119.46, S&P -96.09 at 3829.34

https://www.briefing.com/stock-market-update

[BRIEFING.COM] The S&P 500 dropped 2.5% on Thursday, as another steep rise in Treasury yields undercut risk sentiment and contributed to valuation-oriented weakness in the mega-cap/growth stocks. The Nasdaq Composite fell 3.5%, the Russell 2000 fell 3.7%, and the Dow Jones Industrial Average fell 1.8%.

Specifically, the yield on the 10-yr Treasury note climbed 13 basis points to 1.52%, which was above the S&P 500's dividend yield of 1.51% and 43 basis points higher than where it started the month. This rate of change didn't sit well with the market, even though it was expectations for economic growth and inflation that contributed to the higher yields.

What's more, the 10-yr yield briefly spiked to 1.61% following an ugly 7-yr note auction at 1:00 p.m. ET that saw weak demand. The 2-yr yield increased four basis points to 0.17%. The U.S. Dollar Index increased 0.1% to 90.25.

As for the price action in equities, the retreat was orderly throughout the day with growth stocks taking the brunt of the damage.

The S&P 500 consumer discretionary (-3.6%) and information technology (-3.5%) sectors dropped at least 3.5% amid weakness in their mega-cap components, the Philadelphia Semiconductor Index dropped 5.8%, and the ARK Innovation ETF (ARKK 129.51, -8.81) dropped 6.4%. Out of the 11 S&P 500 sectors, the utilities sector (-1.0%) declined the least.

NVIDIA (NVDA 532.30, -47.66, -8.2%) was an influential laggard with an 8% decline despite beating top and bottom-line estimates and issuing upbeat Q1 revenue guidance.

On the upside, shares of Twitter (TWTR 74.59, +2.67, +3.7%) closed higher after the company said it's aiming to double total annual revenue to $7.5 billion in 2023. Shares of GameStop (GME 108.73, +17.02, +18.6%) had doubled for the second straight day before closing with a more modest gain.

Interestingly, the S&P 500 closed above its 50-day moving average (3805) after coming within ten points of the key technical level at its intraday low (3814). Investors continued to brace for further downside, though, evident by the 35% spike in the CBOE Volatility Index (28.89, +7.55, +35.4%).

WTI crude futures ($63.47/bbl, +0.25, +0.4%) settled in positive territory.

Reviewing Thursday's economic data:

Initial claims for the week ending February 20 decreased by 111,000 to 730,000 (Briefing.com consensus 820,000). Continuing claims for the week ending February 13 decreased by 101,000 to 4.419 million.
The key takeaway from the report is that this is the lowest level of weekly initial claims since early November, which should lend some confidence to the notion that economic activity is picking up again following a late fourth quarter stupor.
Durable Goods Orders for January surged 3.4% m/m (Briefing.com consensus 1.2%) following an upwardly revised 1.2% increase (from 0.2%) in December. Excluding transportation, durable goods orders rose 1.4% (Briefing.com consensus 0.6%) following an upwardly revised 1.7% increase (from 0.7%) in December.
The key takeaway from the report is that it showed an ongoing pickup in business spending, evidenced by a 0.5% m/m increase in nondefense capital goods orders excluding aircraft. These orders -- a proxy for business spending -- are now up 8.3% yr/yr.
The second estimate for Q4 GDP was revised to 4.1%, as expected, from 4.0%. The GDP Price Deflator was bumped up to 2.1% (Briefing.com consensus 2.0%) from 2.0%.
The key takeaway from the report is that it won't be a market mover because (a) it was largely in line with expectations (b) it didn't change much at all from the first estimate and (c) it is dated information, having been released nearly two-thirds of the way through the first quarter.
Pending home sales decreased 2.8% m/m in January following an upwardly revised 0.5% increase in December (from -0.3%).

Looking ahead to Friday, investors will receive Personal Income and Spending for January, PCE Prices for January, the final University of Michigan Index of Consumer Sentiment for February, and Adv. Intl. Trade in Goods, Retail Inventories, and Wholesale Inventories for January.

Russell 2000 +11.4% YTD
Nasdaq Composite +1.8% YTD
S&P 500 +2.0% YTD
Dow Jones Industrial Average +2.6% YTD

Market Snapshot
Dow 31402.01 -559.85 (-1.75%)
Nasdaq 13119.46 -478.54 (-3.52%)
SP 500 3829.34 -96.09 (-2.45%)
10-yr Note -14/32 1.529
NYSE Adv 436 Dec 2764 Vol 1.2 bln
Nasdaq Adv 528 Dec 3339 Vol 6.3 bln

Industry Watch
Strong: Utilities, Health Care
Weak: Information Technology, Consumer Discretionary, Communication Services, Materials

Moving the Market

-- Weak session amid another steep rise in Treasury yields

-- 10-yr yield briefly touched 1.61% before closing at 1.52%

-- Equity decline was broad-based and orderly

WTI crude futures settle higher despite market weakness
25-Feb-21 15:30 ET
Dow -557.31 at 31404.55, Nasdaq -458.94 at 13139.06, S&P -94.55 at 3830.88

[BRIEFING.COM] The S&P 500 is trading at session lows with a 2.4% decline. The retreat has been orderly, reflecting a lack of buying interest.

One last look at the S&P sectors shows steep losses across the board. The information technology