Stock futures opened higher on Monday to hold onto gains after a recovery rally, with investors at least temporarily shaking off concerns over a new coronavirus variant and looking ahead to new market catalysts.
Contracts on the S&P 500, Dow and Nasdaq rose. Each of the three major indexes had ended the regular trading day solidly in the green, with technology stocks leading the way higher and helping pull the Nasdaq up by nearly 2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.
Investors were heartened by remarks from the White House, when President Joe Biden said the newly discovered Omicron coronavirus variant was “not a cause for panic.” Biden said he intended to announce on Thursday the White House’s strategy for addressing coronavirus this winter, and that this plan would not include lockdowns, but would instead emphasize vaccinations, boosters and testing. The Centers for Disease Control and Prevention (CDC) on Monday updated its guidance to say all individuals aged 18 and older “should” get a booster coronavirus vaccine, strengthening this from previous language primarily aimed at getting those considered most at risk an additional dose of the shots.
Prospects that widespread lockdowns would likely not come to the U.S. in the face of the latest variant helped fuel a broad risk-on rally on Monday. This came in sharp contrast with Friday’s moves immediately following the World Health Organization’s announcement of Omicron as a “variant of concern,” which sparked the Dow’s worst plunge since Oct. 2020.
“This is not a repeat of March 2020,” Paul Schatz, Heritage Capital President, told Yahoo Finance Live on Monday. “This looks nothing like March of 2020, yet it’s so recent in our history, people immediately think, ‘Omicron is here, oh my gosh this is going to be a 30{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} decline, we’re going to go straight down’ … You need to equally weigh history, not weigh it based on how recent it was in your memory.”
Still, the sectors and individual stocks that outperformed on Monday were largely technology names, which have served as defensive trades throughout the pandemic as investors bet on more stay-in-place behavior among consumers.
But at the same time, the emergence of the latest variant has also led a number of pundits to speculate that the Federal Reserve might take a more dovish approach to monetary policy to continue supporting the economy as it deals with ongoing virus-related concerns. That could in turn keep interest rates low for longer and support longer-duration growth stocks.
“To take a step back, I think you had a global economy that in the fourth quarter [of 2020] through last week was looking incredibly strong … and then a new variant comes along,” Andrew Sheets, Morgan Stanley chief cross-assets strategist, told Yahoo Finance Live. “That would seem to work against a lot of the trades that work in that high-growth environment, and also seemed to disrupt this ‘do central banks need to act more aggressively’ narrative, because if there’s a new variant, then maybe we should be more cautious.”
Major vaccine-makers including Pfizer, BioNTech and Moderna have already said they were collecting data on the Omicron variant and determining whether and how they would need to rework their existing vaccines to address it. Researchers have also not yet determined whether the new variant is definitively more easily transmitted, or responsible for more severe illness, than previous versions of the virus.
“Information is coming rapidly, it’s evolving in real-time. You can understand why investors [last week] were taking a little bit of a pause, particularly given the liquidity situation we had going into the U.S. holiday season,” Vivek Paul, BlackRock investment institution U.K. chief investment strategist, told Yahoo Finance Live on Monday. “I think the reaction you see today puts it in a little bit of context. We’ve seen more information come out, clearly we have to await the science and a bit more detail with regards to the longevity of how Omicron plays out.”
“But we would be in-line with the market reaction today: We think on balance, it would make sense to be invested in the markets at this moment in time,” he added. “It’s all about understanding whether or not this is a delay, or a derailment, of the restart that we’ve seen. And it seems most likely at this moment — not withstanding more information to come— that it looks like a delay.”
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6:15 p.m. ET Monday: Stock futures hold onto gains
Here were the main moves in markets as the overnight session kicked off:
S&P 500 futures (ES=F): +9 points (+0.19{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 4,660.00
Dow futures (YM=F): +78 points (+0.22{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 35,155.00
Nasdaq futures (NQ=F): +29 points (+0.18{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 16,419.75
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 29, 2021. REUTERS/Brendan McDermid
The Dow Jones Industrial Average’s (^DJI) worst daily plunge of the year sparked a split among market strategists on whether Friday was a good buying opportunity.
The index closed down more than 900 points, while the broader S&P 500 (^GSPC) average declined 2.27{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.
Energy, financials and industrial stocks led the markets lower amid concerns of a new COVID variant first detected in southern Africa.
“To the extent this is not as big as Delta was ultimately, then I think maybe it’s a little bit of a buying opportunity,” Simeon Hyman, ProShares Global Investment Strategist told Yahoo Finance Live on Friday. “All the economic data of the last month or so was really, really strong—I mean, an all-time high ISM Services… Manufacturing was also high. And retail sales was up 1.7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.”
The Down Jones Industrial Index year-to-date. Friday’s selloff was they year’s largest single-day drop despite a holiday-shortened session. (Yahoo Finance)
Other strategists are sounding off warning signs of trouble ahead.
“I don’t see it as a buying opportunity. I see this as the first leg of a multistep downward move in the S&P “, Ed Budowsky, a Chapwood Investments managing partner, told Yahoo Finance Live (video above). “This new variant is an excuse to sell off the market, because the market is so overpriced.”
Chapwood added that the market “has been 31{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} overvalued for a number of months. It’s definitely going to be a downward move going into 2022. … You just can not support and justify for a long period of time, this kind of valuation.” said the strategist.
The Dow Jones Industrial average declined more than 1,000 points at one point during Friday’s shortened trading session.
Actor Rubén Cerda as ‘Santa Claus’, and Grinch behind performing during lighting of the Christmas tree in Xochimilco, on November 25, 2021 in Xochimilco, Mexico. (Photo by Medios y Media/Getty Images)
Travel-related stocks were among the sectors that slid on Friday over concerns of renewed lockdowns and tighter restrictions. Stay-at-home trades, meanwhile, rebounded: Video calling software-maker Zoom (ZM) was up more than 7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}. At-home-fitness company Peloton Interactive (PTON) gained more than 5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} during the shortened trading session.
“I think it’s a reaction to the uncertainty,” BNP Paribas Asset Management Chief Market Strategist and Co-Head Investment Insights Centre Daniel Morris said on Yahoo Finance Live, later adding: “We clearly are going into the winter and it does seem, at this point, anticipating the potential problems as opposed to waiting to see if they’re confirmed.”
Vaccine maker Pfizer (PFE) hit an all-time-high on Friday after a Citi analyst highlighted the company is capable of producing a variant shot in 100 days.
Read the latest financial and business news from Yahoo Finance
U.S. stocks plunged on Friday, with global markets rattled by a new coronavirus variant discovered in South Africa, which fanned concerns that new growth-crushing lockdowns could be imposed if the variant spreads widely.
Trading volumes were low due to the Thanksgiving holiday in the U.S., which may have exacerbated the volatility.
However, major benchmarks fell sharply during the holiday-shortened session, with the Dow (^DJI) diving by more than 900 points — logging its worst day of the year and its third worst Thanksgiving selloff ever. Meanwhile, S&P 500 (^GSPC) sank by over 2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, its biggest drop since February, and the Nasdaq (^IXIC) also fell sharply, but its losses were partly contained by a rally in stay-at-home stocks.
A new coronavirus variant has been discovered in South Africa, leading to an emergency session of the World Health Organization. Dubbed “Omicron,” scientists say the new B.1.1.529 strain is a concern, because it harbors a large number of mutations found in other variants — including the fast-spreading Delta variant that exploded over much of the summer — and it seems to be rapidly spreading.
While there’s no evidence yet, health officials are worried that the mutating variant could dilute or resist the efficacy of vaccines.
“It goes without saying that it’s still too early to say exactly how big a threat the new B.1.1.529 strain poses to the global economy,” Neil Shearing, Group Chief Economist at Capital Economics, said in a note.
Still, “the lesson from the past couple of years is that it’s the restrictions that are imposed in response to the virus – rather than the virus itself – that causes the bulk of the economic damage. So, the key question is how governments will respond in the event that the B.1.1.529 strain spreads,” Shearling wrote.
“That in turn will hinge on the extent to which it escapes the vaccines and, importantly, causes strains in national healthcare systems,” he added — underscoring that governments in the U.S. and U.K. had taken a “learn to live with the virus” approach, and thus are far less likely than other regions to impose new restrictions.
BioNTech (BNTX) said on Friday it expects more data on the new coronavirus variant in South Africa within two weeks to help its shots should be reworked, and that the company and Pfizer (PFE) — its vaccine partner — could redesign its vaccine within 6 weeks, with an aim to distribute it within 100 days.
Pfizer surged as much as 8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to record, signaling that the new variant could create demand for the vaccine.
While fears of COVID-19 dominated investors’ attention for much of 2020 and 2021, Pfizer confirms it could make variant vaccine in 100 days with the ability to make four billion doses in the first 12 months, according to Citi analyst Andrew Baum.
Travel and leisure-related stocks were among those hit the hardest early Friday, with Carnival Corp (CCL) and Royal Caribbean (RCL) down by 10{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} in premarket trading. United Airlines (UAL), Delta Air Lines (DAL) and American Airlines were down each 7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} each. Boeing slipped 6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}. Marriott International and Hilton Worldwide fell more than 5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.
Travel platform Expedia (EXPE) was the fifth-worst performer in the S&P 500, dropping by 11{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} during the shortened trading day, while home sharing site Airbnb (ABNB) was down more than 5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.
On the flip side, stay-at-home stocks gained Zoom (ZM) up 9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, while Netflix (NFLX) bounded higher by 2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.
Oil prices also swooned to the lowest levels in more than two months Friday sparking fears about a slowdown in demand.
U.S. oil dropped 10{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} its the worst day since April 2020, with U.S. crude futures down 6.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to $73.57 per barrel on perceived fears of falling demand amid the new variant.
Bond yields have also fallen as the market’s inflation fears temporarily gave way to the desire for safe-haven assets. The yield on the benchmark 10-year U.S. Treasury note was down to 1.53{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} after closing at 1.63{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} on Wednesday.
“We’re still in a place where yields are so low that the safe haven of bonds isn’t as safe as it looks,” ProShares’ Simeon Hyman told Yahoo Finance Live on Friday. “You’re making not that much today on that little bit of rally in treasuries, so it’s a tough spot.”
Banks, which benefit from the higher interest rates, were broadly weaker as bond yields declined. Bank of America sinks 5.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, Wells Fargo drops 6.3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, Citigroup loses 4.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, JPMorgan declines 4.7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, Goldman Sachs sheds 3.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} and Morgan Stanley tumbled 4.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
__
1:00 p.m. ET: Stocks slump on Black Friday, as new variant spooks investors
Here were the main moves in markets as of 1:00 p.m. ET:
S&P 500 (^GSPC): -106.65 (-2.27{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 4,594.81
Dow (^DJI): -903.59 (-2.52{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 34,900.79
Nasdaq (^IXIC): -353.57 (-2.23{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 15,491.66
Crude (CL=F): +$9.73 (-12.41{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $68.66 a barrel
Gold (GC=F): -$1.10 (-0.06{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $1,785.40 per ounce
10-year Treasury (^TNX): -1.4 bps to yield 1.54{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
11:15 a.m. ET: Carnival, travel slumps on fears of South African Covid variant
Cruise lines stocks continues to retreat as covid fears swelled. Carnival Corp (CCL) shed more than 12{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, while Royal Caribbean (RCL) sunk more than 11{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.
11:10 a.m. ET: Stocks slump midday
Here’s where markets were trading midday:
S&P 500 (^GSPC): -93.46 (-1.99{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 4,608.00
Dow (^DJI): -913.69 (-2.55{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 34,890.69
Nasdaq (^IXIC): -318.08 (-2.02{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 15,523.46
Crude (CL=F): -$9.24 (-11.79{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $69.15 a barrel
Gold (GC=F): $13.30 (0.75{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $1,797.60 per ounce
10-year Treasury (^TNX): -1.49 bps to yield 1.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
10:30 a.m. ET: The end of the interest rate differential play?
Friday’s decidedly risk-off tone is calling into question the level of aggressiveness with which the Federal Reserve may pull back on its stimulus. Only a day ago, some thought the rapid surge in prices could prompt the Fed to speed up a taper — or even hike rates faster.
What a difference a day makes. Marc Chandler at Bannockburn Global FX, pointed out in a research note that the rise of a new variant is scrambling Fed expectations versus the European Central Bank and the Bank of Japan:
The dollar’s rally has been fueled by the prospect of a divergence of monetary policy that favored the Fed over the ECB and BOJ. Indeed, since the November 10 surprise jump in the October CPI to above 6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, we had emphasized the likelihood that the Fed would have to taper quicker to give it the flexibility to lift rates earlier if needed. Since then, 4-5 Fed officials and several large banks have also underscored this possibility. However, this scenario is being called into question today, which is evident in the swaps markets and the Fed funds futures.
9:30 a.m. ET: Stocks open sink
Here’s where markets were trading just before the opening bell:
S&P 500 (^GSPC): -66.85 (-1.42{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 4,634.61
Dow (^DJI): -848.78 (-2.37{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 34,955.60
Nasdaq (^IXIC): -133.91 (-0.83{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 15,708.01
Crude (CL=F): -$5.34 (-6.81{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $73.05 a barrel
Gold (GC=F): $21.20 (1.19{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $1,805.50 per ounce
10-year Treasury (^TNX): -1.52 bps to yield 1.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
NEW YORK, NEW YORK – SEPTEMBER 30: Traders work on the floor of the New York Stock Exchange (NYSE) on September 30, 2021 in New York City. In afternoon trading the Dow was down over 250 points as investors continue to worry about inflation, wages and supply chain issues. (Photo by Spencer Platt/Getty Images)
Thanksgiving feasts will likely draw larger crowds than last year and incur higher costs.
A recent Bank of America note detailed which companies have the most exposure to the top holiday dishes amid supply chain bottlenecks, inflation, lingering COVID concerns, low inventories, and evolving consumer behaviors.
Those companies are Campbell’s Soup Company (CPB), General Mills (GIS), The Kraft Heinz Company (KHC), Conagra Brands (CAG), Hormel Foods Corporation (HRL), McCormick & Company (MKC), and The Duckhorn Portfolio, Inc. (NAPA).
“We looked at companies’ exposure to the top Thanksgiving dishes: turkey, stuffing, dinner rolls, gravy, green bean casserole, potatoes, mac & cheese dessert and wine,” the analysts stated. “Overall CPB, GIS, KHC, CAG, MKC, HRL and NAPA are the most exposed. KHC and NAPA are our favorite stocks in this group.”
Key companies exposed to Thanksgiving meal trends. (Source: BofA)
Thanksgiving ‘center of the plate’ items see more pricing power
People appear to be gathering around the table again, the analysts stated, as data from social media conversations found mentions of “vaccines” on the rise while mentions of “FaceTime,” “social distancing,” and “canceled” declined. (“Friendsgiving” and “day drinking” also saw increases.)
And whether consumers opt for turkey or ham, mashed potatoes or marshmallow-topped sweet potatoes, traditional or plant-based options, they’re likely to pay more with inflation hitting food prices.
The American Farm Bureau Thanksgiving cost index projects a 14{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} year-over-year increase for 2021, led by a 24{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} increase in turkey prices.
“When you look at more of the center of the plate sort of food items, typically, there has not historically been a lot of pricing power,” Bryan Spillane, a senior food and beverage analyst at BofA Global Research, told Yahoo Finance Live (video above). “But what’s unusual this year is that there has been. Food companies, in particular, began raising prices the middle of the year, and there’s virtually been no elasticity.”
Frozen turkeys in Philadelphia, Wednesday, Nov. 17, 2021. (AP Photo/Matt Rourke)
That said, Spillane added, consumer behavior is expected to change at some point.
“Something that we’re really watching as we move into next year is: At what point does the consumer begin to push back and do we begin to see some trading down or other behavior that demonstrates that consumers are feeling that pinch?” Spillane said.
Investor appetite for food and beverage companies
The top company with the most upside or downside potential is Campbell’s, which BofA gave an “underperform” rating.
“Campbell’s struggling from a few issues,” Spillane said. “One is they are experiencing a material amount of inflation. They have a product portfolio that’s a little bit more skewed… to kind of middle and low-income households. So, that’s, maybe, an area where there may be some sensitivity around passing those prices through.”
The iconic soup company also has a lot of direct and indirect exposure to labor shortages and higher labor costs, Spillane added.
Cans of Campbell’s Soup are displayed in a supermarket in New York City, U.S. February 15, 2017. REUTERS/Brendan McDermid
BofA also gave seasoning-maker McCormick & Company an “underperform” rating, with an $84 price target.
McCormick is “still trading at a premium valuation,” Spillane said, adding that while it has benefitted from people having cooked at home more in the last 18 months, “at some point, as things moderate, you’re going to see less of that cooking at home behavior. And that’s going to create an overhang for McCormick.”
On the flip side, “Hershey [HSY] is well-positioned,” Spillane said, especially when it comes to the inflationary environment.
“The combination of a category that’s still growing very strongly where there’s still a lot of product innovation and where there’s been demonstrated pricing power, we think that Hershey is set up really well to be able to maybe even more than protect margins, maybe potentially grow margins as we cycle through some of this inflation,” he explained.
BofA also awarded Stove Top stuffing-maker Kraft Heinz a buy rating with a $46 price objective.
“We believe this is justified based our view that KHC is well positioned to capture growth associated with changing consumer demand patterns related to recessions and pantry stocking offset by higher than average debt levels,” the analysts wrote.
Grace is an assistant editor for Yahoo Finance.
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The number of Americans applying for first-time jobless claims reached the lowest level since November 1969, with the number of filings dropping to 199,000.
Improvements in the labor market have been broad-based, with the weekly rate of those rendered newly unemployed falling precipitously across the country since the height of the COVID-19 pandemic last year.
As usual, the Labor Department’s latest weekly report included a breakdown of the states and territories with the highest and lowest insured unemployment rates, or the ratio of people claiming jobless benefits divided by the overall size of the labor force. For a number of states, this key labor market metric improved to its best level in two years, showing an even smaller proportion of their populations were claiming jobless benefits than before the coronavirus outbreak.
“I don’t even think you can call it an economic recovery anymore,” Chris Rupkey, chief economist for FWDBONDS, told Yahoo Finance Live. “Remember the best economy in 50 years late in 2019? Well, we’re way, way, way above that right now. I don’t even think you can call this a reopening of the economy after the pandemic — we’re miles and miles ahead of the fourth quarter of 2019.”
South Dakota was the state with the lowest insured unemployment rate. As of the week ended Nov. 6, the state’s rate was at 0.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} on a seasonally unadjusted basis. The last time this figure was below that level was in October 2019.
The national average insured unemployment rate was at 1.3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} for the same week, or the lowest since December 2019. At its worst pandemic-era point in May 2020, during widespread lockdowns and layoffs, the insured unemployment rate peaked at 15.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} nationally.
Other states also posted insured unemployment rates well below the national average. Alabama’s insured unemployment rate for the week ended Nov. 6 came in at 0.3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, or the lowest on record for the state based on data spanning back to the 1980s. Nebraska’s rate also came in at 0.3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} for the period, marking a two-year low.
Five states — Kansas, New Hampshire, North Dakota, Utah and Virginia — posted insured unemployment rates of 0.4{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} for the start of November, also representing a marked improvement from their pandemic-era highs.
A little less than half of U.S. states and territories — or 19 in total — posted insured unemployment rates at or above the national average at the start of the month. Of these, the Virgin Islands saw the highest rate at 3.0{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, which marked a slight uptick from the prior week’s 2.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} rate. Still, this was well below its pandemic-era peak of nearly 18{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} in June 2020.
Meanwhile, Puerto Rico, Washington, D.C., and Alaska each posted insured unemployment rates of 2.7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, tying for the second-highest rates in the nation, based on the latest data. California followed close behind with an insured unemployment rate of 2.6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}. Many of the states posting persistently elevated insured unemployment rates have been those that rely heavily on tourism and their service economies, given the ongoing recovery still taking place in these industries after the outbreak.
“Workers remain in high demand in a labor market where payrolls and the civilian labor force remain well below pre-pandemic levels,” wrote Rubeela Farooqi, chief U.S. economist for High Frequency Economics, in a note Wednesday morning. “Developments on the health front remain a risk that may weigh on labor supply, but we expect workers to gradually return to the labor market, as the cushion from savings diminishes, supporting job growth over coming months.”
Stock futures dipped Tuesday evening, holding lower following an extended rout in technology stocks. Investors also anxiously awaited a packed slate of economic data results out Wednesday before a holiday market closure.
Rising interest rates coincided with a selloff in tech and growth stocks for a second day this week, with the Nasdaq dropping another 0.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} after Monday’s more than 1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} decline. The Dow held up strongly and added nearly 200 points, with energy and financials stocks outperforming. The 10-year Treasury yield rose to near 1.7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.
“Initially, the markets were happy with the FOMC decision [for Fed Chair Jerome Powell’s renomination] in the sense that it was sort of a continuity play to some degree. But then rates started to rise, and a lot of folks read rising rates as negative for big-cap tech,” Stuart Kaiser, UBS head of equity derivatives research, told Yahoo Finance Live. “So I think the tradeoff we’re going to have here is that, tech has been market leadership — it’s obviously a strong earnings growth and free cash flow engine for U.S. equities — but if you believe it’s going to come under pressure from higher yields, then you end up with kind of a difficult Catch-22.”
Investors are set to receive a deluge of economic data on Wednesday ahead of the Thanksgiving Day market holiday, with both the U.S. stock and bond markets set to close all day Thursday. These reports will include weekly jobless claims, along with the second estimate of third-quarter U.S. GDP. And importantly, the Bureau of Economic Analysis will release the October personal consumption expenditures (PCE) deflator, offering an updated look at the extent of the price increases still reverberating through the U.S. economy.
The headline PCE deflator is expected to rise by 5.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} in October over last year for its fastest annual growth rate in more than three decades. Taken in tandem with a bevy of other data pointing to persistently high inflation, investors are speculating that the Federal Reserve will step in and raise benchmark interest rates from their near-zero levels next year to try and stem rising prices.
According to other analysts, the market action this week — with a renewed rotation away from technology and growth stocks in the face of rising rates — could presage the investing environment for next year.
“Today might be an example of what we see more of next year as the Fed moves into a mode of withdrawing liquidity from the markets and ending these pandemic-era policies, perhaps with rate hikes at the end of the year,” Jeffrey Kleintop, Charles Schwab chief global investment strategist, told Yahoo Finance Live. “And that means higher-valuation stocks, well, they tend to not do as well in environments of rising interest rates and tighter financial conditions.”
“So you may want to look to be in those sectors that are maybe trading closer to their average valuations, looking to leadership like financials, energy,” he added. “The only caveat to that is when we see these upticks in COVID cases globally, it tends to favor those lockdown defensives like technology.”
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6:16 p.m. ET Tuesday: Stock futures open lower
Here’s where markets were trading Tuesday evening:
S&P 500 futures (ES=F): -4.75 points (-0.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 4,683.75
Dow futures (YM=F): -27 points (-0.08{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 35,739.00
Nasdaq futures (NQ=F): -17.25 points (-0.11{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 16,294.75
NEW YORK, NEW YORK – NOVEMBER 15: A trader works on the floor of the New York Stock Exchange (NYSE) on November 15, 2021 in New York City. Following positive economic news out of China, stocks were up in morning trading on Monday with investors looking at retail sales and earnings results out from major U.S. companies later this week. (Photo by Spencer Platt/Getty Images)
