S&P 500, Nasdaq fall as yields rally on hot labor market data

3 weeks ago 35
  • 10-yr Treasury yield races above 4%
  • Tesla slides after investor day
  • Weekly jobless claims fall more than expected
  • Indexes: Dow up 0.06%, S&P off 0.56%, Nasdaq falls 0.93%

March 2 (Reuters) - The benchmark S&P 500 and the tech-heavy Nasdaq fell on Thursday as the 10-year Treasury yield surged above 4% following hotter-than-expected labor market data, while Tesla sank after it gave few details on its affordable electric vehicle.

The number of Americans filing new unemployment claims fell again last week, according to a Labor Department report that pointed to sustained strength in the labor market, while another report showed U.S. labor costs grew faster than initially thought in the fourth quarter.

The yield on 10-year Treasury notes - the benchmark for global borrowing costs - raced further above the 4% level on Thursday to touch a fresh four-month high of 4.06%.

The two-year yield , which best reflects short-term rate expectations, hit a fresh 15-year high at 4.93%.

"It doesn't look like the jobs market is responding to higher rates. The unit labor cost is double the expectations because wages are up and productivity is down, so nothing is really working in favor of markets," said Jack Ablin, chief investment officer at Cresset Capital.

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After a lackluster performance in February, Wall Street indexes kicked off March on a volatile note as fresh evidence of persistent price pressures and comments from Federal Reserve policymakers fueled worries about the U.S. central bank staying hawkish for longer.

The S&P 500 and Nasdaq fell on Wednesday after data showed U.S. manufacturing contracted for a fourth straight month in February, although raw material prices increased last month.

Traders of futures tied to the Fed's policy rate saw about an even chance that the rate will get to a range of 5.5%-5.75% by September, from the current range of 4.5% to 4.75%.

U.S. monthly payrolls and consumer prices data in the coming days will offer investors more clues on the path of rates heading into the Fed's March 21-22 meeting, where it is currently expected to raise rates by 25 basis points.

At 9:39 a.m. ET, the Dow Jones Industrial Average (.DJI) rose 20.50 points, or 0.06%, at 32,682.34 as Salesforce Inc (CRM.N) soared 12.9% after the cloud-based software firm forecast first-quarter revenue above analysts' estimates and doubled its share buyback to $20 billion.

The S&P 500 (.SPX) fell 22.28 points, or 0.56%, to 3,929.11, but was trading near its 200-day moving average, seen as a key support level by traders.

The Nasdaq Composite (.IXIC) dropped 105.26 points, or 0.93%, at 11,274.22.

Tesla Inc (TSLA.O) fell 7.8% after Chief Executive Elon Musk and team's four-hour presentation failed to impress investors with few details on its plan to unveil an affordable electric vehicle.

Macy's Inc (M.N) jumped 9.6% after the department store operator forecast full-year profit above Wall Street estimates.

Silvergate Capital (SI.N) plunged 47.6% after the crypto-focused lender delayed its annual report and said it was evaluating its ability to operate as a going concern.

Declining issues outnumbered advancers for a 5.86-to-1 ratio on the NYSE and 3.00-to-1 ratio on the Nasdaq.

The S&P index recorded two new 52-week highs and 12 new lows, while the Nasdaq recorded 26 new highs and 71 new lows.

Reporting by Sruthi Shankar in Bengaluru; Editing by Savio D'Souza and Anil D'Silva

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