Before the Bell: The volatility continues apace on Wall Street, with action over the past two trading sessions being especially frenetic. The reason for these gyrations are the high price-earnings ratios in place (particularly following the recent succession of record highs by the key indexes), signs of a nascent rise in inflation, climbing bond yields, and some crosscurrents on the economic front. Meanwhile, after yesterday's dour showing by the stock market throughout the session, the futures are pointing to a higher opening this morning after Treasury Secretary Janet Yellen pushed for more stimulus.
Key economic influences yesterday were a disappointing report on weekly jobless claims and mixed metrics on the housing front. On point, at 8:30 (EST) yesterday, the Labor Department affirmed that 861,000 new unemployment filings were made in the seven days through February 13th. That was modestly higher than the upwardly revised figure for the week before and 100,000 above expectations. That disappointing metric sent in the sellers. At the same time, the government issued mixed data on housing, with starts down but permits up during January.
These issuances followed strong reports out Wednesday on retail spending, industrial production, and factory utilization, as well as figures showing the largest increase producer prices (inflation at the wholesale level) since December 2009 . This latter data point sent some chills through the investment community for its implications on both inflation and fixed-income yields, which already had been climbing. Yields on the 10-year Treasury note (recently at a 52-week high), eased slightly yesterday.
Regarding the stock market, it foundered early, with the Dow Jones Industrial Average quickly falling more than 325 points. Then, after bottoming out in the first half hour of trading, it made some recovery over the course of the session before closing off by 120 points. The NASDAQ, also weaker throughout, ended down by 100 points on selling in some high-profile tech names, such as Tesla (TSLA). The big Dow loser, meantime, was Walmart (WMT) on disappointing quarterly results.
Going forward, in addition to some profit reports being issued, the market will be looking to data on sales of existing homes due out later this morning. Elsewhere, investors figure to be watching Treasury note and bond yields and looking forward to next week in which we will get reports on consumer confidence, new home sales, orders for durable goods, and weekly jobless claims. Finally, in pre-market action this morning, farm products and heavy machinery maker Deere (DE) is showing gains on a blowout quarterly profit report. – Harvey S. Katz, CFA