Wednesday November 24th


Stock futures decline as rising rates continue to unnerve investors, Gap shares lead retail lower

U.S. stock index futures were lower early Wednesday morning as rising rates continued to frighten away investors from high-priced tech shares. Other factors were also influencing the market early Wednesday: Traditional retail stocks took a hit following poor quarterly results. Gap lost 21% and Nordstrom tumbled about 27% in premarket trading. Both companies reported earnings misses for the most recent quarter. Rising Covid cases in Europe continued to worry investors. Germany was considering a full Covid lockdown. A slew of of economic data due out this morning will dictate trading, including weekly unemployment claims, a second GDP update and the Fed’s preferred inflation gauge (PCE deflator). The Fed will release the minutes for their last meeting this afternoon. Dow Jones Industrial Average futures shed 164 points, or 0.5%. S&P 500 futures lost 0.4% and Nasdaq 100 futures also shed 0.6%. Yields have been rising since President Joe Biden’s renomination of Jerome Powell as chairman of the Federal Reserve on Monday. The 10-year Treasury yield ended last week at 1.55% and was last at 1.66% Wednesday. The move in rates has sent investors fleeing from tech and growth shares, while boosting some bank stocks and energy shares. The divided market has left the Dow in the green for the week so far, the S&P 500 slightly lower and the Nasdaq Composite down by about 1.8%. U.S. markets are closed Thursday for Thanksgiving and will close early on Friday in a shortened session. “It’s certainly a story of more rotation,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management. “The market is now — with the Powell renomination — thinking this is a reopening story, which sets aside any of the risks or concerns we might have about rising Covid infection rates.” Futures briefly came off their lows on Wednesday morning after some positive economic data. Initial jobless claims for the prior week came in at 199,000, the lowest level in more than 50 years. GDP growth for the third quarter was revised up slightly to 2.1%. The data was not uniformly positive, however, as durable goods orders showed an unexpected decline in October, according to the Census Bureau. Gap shares plummeted after the company said third-quarter results fell short because of product delays. Earnings last quarter were just 27 cents a share, nearly half what analysts had expected. Tesla shares were lower again after Elon Musk sold another $1 billion in stock. Computer hardware company HP’s shares got a more than 6% lift in the premarket after reporting earnings that beat on the top and bottom lines and issuing higher first-quarter earnings guidance. Later on Wednesday, investors will be looking through the minutes from the latest Fed meeting. Shares in Asia-Pacific were mixed on Wednesday, with Japanese stocks leading losses regionally. The Nikkei 225 in Japan fell 1.58% to close at 29,302.66 while the Topix index declined 1.16% to 2,019.12. Markets in Japan were closed on Tuesday for a holiday. South Korea’s Kospi dipped 0.1% on the day to 2,994.29. Hong Kong’s Hang Seng index rose 0.54% as of its final hour of trading. Mainland Chinese stocks finished the trading day mixed, with the Shanghai composite rising 0.1% to 3,592.70 and the Shenzhen component shedding 0.118% to about 14,887.60. Elsewhere in Asia, the Straits Times index in Singapore gained 0.12%, as of 3:16 p.m. local time. Oil prices were steady on Wednesday as investors questioned the effectiveness of a U.S.-led release of oil from strategic reserves and turned their focus to how producers will respond. Brent crude futures were down 27 cents, or 0.3%, to $82.04 a barrel, after rising 3.3% on Tuesday. U.S. West Texas Intermediate (WTI) crude futures fell 23 cents, or 0.2%, to $78.27 a barrel, following a 2.3% gain in the previous day. Gold prices edged up on Wednesday, although strength in the U.S. dollar and bets that the Federal Reserve could raise interest rates sooner kept the metal below the key $1,800 mark. Spot gold rose 0.3% to $1,794.96 per ounce by 0239 GMT, after slipping as much as 1.4% to its lowest since Nov. 5 on Tuesday. U.S. gold futures added 0.6% to $1,793.90 per ounce.