Stocks sank Thursday to give back gains after a record-setting session, with investors nervously eyeing signs that the economic recovery might get derailed.
The S&P 500, Dow and Nasdaq were each off by more than 1%. This marked the first time since June that the S&P 500 opened more than 1% lower. A day earlier, the blue-chip index rose to a record closing high for the eighth time in the last nine sessions as concerns over a near-term monetary policy adjustment and sustainably high inflation abated. The Dow, which is heavy in cyclical and value stocks that stand to benefit from a strong economic recovery, underperformed against those the other two major indexes.
The benchmark 10-year Treasury yield sank further to hover around 1.29%, with the dip in rates reflecting both easing inflation expectations but also uncertainty over the sustainability over the recovery. Concerns over the global recovery also increased after Japan proposed re-instituting a state of emergency ahead of the Tokyo Olympics due to recent COVID-19 surges.
“People have. some concerns about how the Delta variant is going to play out in the economy, and we don’t know what’s going to happen to the spending with consumers once unemployment benefits run out in the September time frame,” Julie Biel, Kayne Anderson Rudnick portfolio manager, told Yahoo Finance on Thursday. “I think there’s a lot of uncertainty, and how I would characterize this rally is, it is kind of a cynical rally, where people don’t necessarily feel as strongly about the economy, but they feel they have to stay invested. And so I think the fact that it is in this mindset means that it could pull back very quickly. So I would expect more volatility going forward.”
Recent data on the economic recovery has been mixed, with job openings rising to yet another record high in May and labor scarcities curbing the pace of the rebound across industries. Thursday’s jobless claims report showed new weekly filings unexpectedly increased, with the number of new filers and total claimants still highly elevated compared to pre-pandemic levels.
The Federal Reserve’s June meeting minutes underscored these and other lingering economic concerns and showed that central bank officials still saw some downside risk to the recovery that warranted their asset purchases and ultra-low interest rates to remain for the time being. As the Federal Open Market Committee’s minutes said, “The Committee’s standard of ‘substantial further progress’ was generally seen as not having yet been met, though participants expected progress to continue.”
“The minutes do not suggest an imminent shift in policy. In contrast to the market’s hawkish interpretation of the June meeting and Summary of Economic Projections (SEP), the minutes show a more dovish Committee,” Steven Ricchiuto, U.S. chief economist for Mizuho Securities, wrote in an email. “This is a balanced Committee that is planning in the face of an uncertain outlook.”
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9:30 a.m. ET: Stocks open sharply lower
Here’s where markets were trading shortly after the opening bell:
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S&P 500 (^GSPC): -60.24 points (-1.38%) to 4,297.89
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Dow (^DJI): -385.04 (-1.11%) to 34,296.75
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Nasdaq (^IXIC): -245.46 (-1.67%) to 14,416.08
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Crude (CL=F): -$0.28 (-0.39%) to $71.92 a barrel
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Gold (GC=F): +$14.30 (+0.79%) to $1,816.40 per ounce
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10-year Treasury (^TNX): -2.7 bps to yield 1.29%
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9:07 a.m. ET: New jobless claims unexpectedly increased last week
The number of individuals filing new jobless claims unexpectedly rose during the week ended July 3, with the move higher reflecting a still-choppy recovery in the U.S. labor market.
Initial jobless claims totaled 373,000 last week, coming in above the pandemic-era low of 350,000 expected. The prior week’s new claims were also revised up slightly to 371,000.
Continuing jobless claims, reported on a one-week lag, were slightly lower than expected for the week ended June 26, totaling 3.339 million versus the 3.35 million anticipated.
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7:25 a.m. ET Thursday: Stock futures sink as concerns over COVID variants, economic recovery resurge
Here’s where markets were trading Thursday morning:
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S&P 500 futures (ES=F): 4,293.00, -56.75 points (-1.3%)
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Dow futures (YM=F): 34,094.00, -474.00 points (-1.37%)
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Nasdaq futures (NQ=F): 14,613.25, -189 points (-1.28%)
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Crude (CL=F): -$0.39 (-0.54%) to $71.81 a barrel
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Gold (GC=F): +$14.50 (+0.8%) to $1,816.60 per ounce
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10-year Treasury (^TNX): -4.5 bps to yield 1.275%
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6:18 p.m. ET Wednesday: Stock futures gain
Here’s where markets were trading Wednesday evening:
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S&P 500 futures (ES=F): 4,351.25 +1.5 points (+0.03%)
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Dow futures (YM=F): 34,588.00, +20 points (+0.06%)
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Nasdaq futures (NQ=F): 14,807.00, +4.75 points (+0.03%)
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck