US stocks fell slightly after rebounding earlier this week as investors watched developments in talks between Russia and Ukraine and reflected on mixed data on the US economy.
The S&P 500 fell. The blue chip index rose for a fourth straight day and closed Tuesday at its highest level since January, reversing some losses for the year to date. On Wednesday morning, the CBOE Volatility Index, or VIX, held below 20, near its lowest level in more than two months.
U.S. crude oil prices rose for the first time in three sessions on Wednesday after falling earlier this week amid signs of progress in Russian-Ukrainian talks. Russia said it was easing military action in the Ukrainian capital Kyiv and the northern city of Chernihiv and was ready to hold a meeting between Russian President Vladimir Putin and Ukrainian President Volodymyr Zelensky following a draft peace agreement. However, on Wednesday, some media suggested that strikes were still taking place near Ukraine’s two major cities.
Meanwhile, investors nervously watched a flattening of the US Treasury yield curve, with longer-term bond yields falling much more sharply than short-term ones, with traders betting on higher Federal Reserve rates to term and reflecting on the murky longer-term macroeconomic outlook. The benchmark 10-year yield rose slightly on Wednesday morning and rose above 2.4%.
The spread, or difference, between 2-year and 10-year Treasury yields — a closely watched part of the yield curve that typically inverted before recessions — has narrowed to its lowest level since 2019 earlier this week. (It reversed for a few seconds on Tuesday.)
“It’s still a fairly accurate indicator [of a recession] if we go back and look at history, but I have to give you some caveats,” Kristina Hooper, Invesco’s chief global market strategist, told Yahoo Finance Live on Tuesday. needs to reverse for a while, usually three months, to be a very accurate indicator. Second, it is a longer term indicator. So, typically, after the yield curve inverts, it takes about 18 months on average for a recession to occur. And that’s a terrible, terrible sell signal, because generally stocks have room to run and run significantly higher after a yield curve inverts.”
The latest batch of US economic data offered a mixed picture of the state of the economy amid continued high inflation, lingering geopolitical uncertainty and tighter Federal Reserve monetary policy. Job postings were little changed at around 11.3 million in March, far outpacing new hires at 6.7 million to reflect ongoing labor shortages. And although the Conference Board’s latest monthly index showed a slight increase in consumer confidence in March, the index remained below last year’s average. In addition, consumers’ one-year inflation expectations climbed to a record high of 7.9%.
“We expect a sharp downward revision to inflation expectations in the second half of the year, but they could easily rise further in the near term,” Ian Shepherdson, chief U.S. economist for Pantheon Macroeconomics, wrote in a note on Tuesday.
“The survey sends mixed signals about the state of the economy but, always remember, sentiment is not the same as spending, that’s what matters,” he added. .
11:04 a.m. ET: RH is sounding the alarm on consumer demand amid Russia-Ukraine conflict and inflation
RH (RH) – the company formerly known as Restoration Hardware – issued a warning about the economic outlook as consumers took note of rising inflation and market volatility amid the Russian- Ukrainian.
“As we enter 2022 confident that our efforts will continue to elevate and expand the HR brand for years to come, we also recognize that there are several external factors, such as record inflation, rising interest rates and global turmoil, which creates uncertainty,” HR CEO Gary Friedman said during the company’s earnings call. “While first quarter sales and margin are expected to remain healthy due to continued relief from our backlog, we experienced a slowdown in demand in the first quarter which coincided with Russia’s invasion of Ukraine. end of February and the market volatility that followed.”
For the first quarter, the furniture company said it expects net revenue to grow between 7% and 8% from a year ago, marking a slowdown from 11% growth. revenue it experienced for the fourth fiscal quarter. The adjusted operating margin should also contract on a quarterly basis between 23% and 23.5%.
RH shares fell more than 12% intraday on Wednesday.
9:30 a.m. ET: Stocks open lower
Here is where the markets were trading just after the opening bell on Wednesday morning:
S&P 500 (^GSPC): -8.17 (-0.18%) to 4,623.43
Dow (^ DJI): -40.27 (-0.1%) to 35,259.91
Nasdaq (^IXIC): -46.91 (-0.32%) to 14,569.93
Raw (CL=F): +$3.53 (+3.39%) at $107.77 per barrel
Gold (CG=F): +$10.00 (+0.52%) at $1,928.00 per ounce
10-year cash flow (^TNX): +2.8 bps for a yield of 2.428%
8:31 a.m. ET: Q4 GDP revised down to 6.9% annualized, personal consumption at 2.5%
The U.S. economy grew at a slightly slower pace than previously reported in the final months of 2021, based on the Bureau of Economic Analysis’ (BEA) final fourth-quarter gross domestic product (GDP) revision. ).
U.S. GDP grew at an annualized rate of 6.9% quarter over quarter in the last three months of 2021, the BEA reported on Wednesday. Previously, GDP growth was 7.0%.
The downward revision to overall GDP came as the BEA cut its measure of personal consumption to show a rate of 2.5% in the fourth quarter, down notably from the 3.1% rate previously posted. Consumer spending accounts for about two-thirds of US economic activity. Nevertheless, the downward revision was partially offset by an upward revision in private investment in inventories, which also contributes positively to GDP.
8:16 a.m. ET: Private payrolls rose by 455,000 in March, slightly beating estimates: ADP
U.S. private sector employers brought in slightly more jobs than expected in March as the economy faced persistent labor shortages and plentiful job vacancies.
Private sector payrolls increased by 455,000 over the past month, ADP said in its latest report on Wednesday. Consensus economists were looking for 450,000 jobs to return, according to data from Bloomberg. In February, employers brought back 486,000 payrolls, based on ADP’s upward-revised monthly figures.
ADP’s report comes two days ahead of the Labor Department’s “official” monthly jobs report for March, which is also expected to show about half a million returned pay stubs for the past month. Although ADP’s report has tended to be an imperfect indicator of the final payroll figure in the government’s employment report, it has often suggested at least directionally the underlying trends in payroll growth. employment.
7:30 a.m. ET: Stock futures fall after S&P 500 posts four straight days of gains
Here is where the markets were trading Wednesday morning:
S&P 500 Futures Contracts (ES=F): -10.5 points (-0.23%) to 4,615.00
Dow futures (JM=F): -77 points (-0.22%) to 35,113.00
Nasdaq futures contracts (NQ=F): -50.25 points (-0.33%) to 15,187.50
Raw (CL=F): +$2.79 (+2.68%) at $107.03 per barrel
Gold (CG=F): +$10.60 (+0.55%) at $1,928.60 per ounce
10-year cash flow (^TNX): +1.3 bps for a yield of 2.413%
7:20 a.m. ET: Mortgage applications fall for third straight week as mortgage rates rise the most in 11 years
U.S. mortgage applications fell for a third straight week last week, with refinances particularly under pressure as mortgage rates jumped the most in more than a decade.
The Mortgage Bankers Association (MBA) weekly index showed a 6.8% decline in claim volume for the week ending March 25. This follows an 8.1% decline for the prior period and coincided with a rise in the 30-year fixed rate mortgage. at 4.8%, compared to 4.5% previously. It’s the biggest weekly increase since 2011 to take rates to their highest level since late 2018.
Refinances fell 15% from the previous week and 60% from the same period last year. On an unadjusted basis, buying was still 1% higher week over week, but down 10% from the same week last year.
“Mortgage rates hit their highest level in more than three years last week as investors continue to price in the impact of tighter monetary policy from the Federal Reserve. Unsurprisingly, the volume of applications refinancing has fallen further as fewer borrowers are incentivized to apply at significantly higher rates than a year ago,” MBA Senior Vice President and Chief Economist Mike Fratantoni said in a statement. hurry.
6:12 p.m. ET Tuesday: Stock futures open slightly lower
Here’s where major stock index futures opened on Tuesday night:
S&P 500 Futures Contracts (ES=F): -4.75 points (-0.1%) to 4,620.75
Dow futures (JM=F): -24 points (-0.07%) to 35,166.00
Nasdaq futures contracts (NQ=F): -15.5 points (-0.1%) to 15,222.25
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.
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