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Market Snapshot: U.S. stock futures wilt before Thanksgiving as financial conditions tighten

U.S. stock indexes lost ground Wednesday morning, extending losses after a deluge of economic data in the run-up to the Thanksgiving holiday on Thursday.

U.S. markets will be closed on Thanksgiving and will end early on the Friday after the holiday.

What’s happening
  • The Dow Jones Industrial Average
    DJIA,
    -0.31%

    fell points 140 points, or 0.4%, to 35,663.

  • S&P 500 index
    SPX,
    -0.19%

    was 26 points, or 0.5%, lower at 4,664.

  • Nasdaq Composite Index
    COMP,
    -0.16%

    gave up 155 points, or 1%, to 15,614.

On Tuesday, the Dow rose 195 points, or 0.55%, to 35814, the S&P 500 increased 8 points, or 0.17%, to 4691, while the Nasdaq Composite dropped 80 points, or 0.5%, to 15775.

What’s driving the market

Investors were sifting through a pre-Thanksgiving data dump on Wednesday. First-time claims for unemployment benefits last week plunged by 71,000 to 199,000. Economists surveyed by The Wall Street Journal had estimated initial jobless claims would total a seasonally adjusted 260,000.

Orders for U.S. durable goods—products meant to last at least three years—fell 0.5% in October, the government said Wednesday. Economists polled by The Wall Street Journal had forecast a 0.3% increase. Yet the decline stemmed entirely from fewer orders for passenger planes, a volatile category that often distorts the level of underlying demand in the economy.

The U.S. trade deficit in goods narrowed 14.6% to $82.9 billion in October. The pace of economic growth in the third quarter was raised to a 2.1% annualized rate versus an initial estimate of 2%.

“Jobless claims blew it out of the water this week—a welcomed signal that the recovery is still strong despite some recent jitters around rising Treasury yields and COVID spikes,” said Mike Loewengart, managing director investment strategy at E-Trade Financial.

“And the somewhat muted second GDP read isn’t likely to rock the boat—keep in mind it’s still a notch higher than we saw last month,” Loewengart said in an emailed note.  

Other economic data due Thursday include readings on personal savings and spending, including the Federal Reserve’s favorite inflation indicators, as well as the latest readings on new-home sales and the University of Michigan’s consumer sentiment index. Minutes of the Fed’s November meeting are due at 2 p.m.

Michael Kramer of Mott Capital Management said in a blog post that he expects the Fed minutes to show the option of a faster taper being discussed in December—giving the market a few weeks “to break Powell into submission and not taper faster.”

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“It may not seem evident when looking at the broader averages, but in the bond ETFs, the dollar index, and the Treasury market, you see massive shifts taking place. All of this is pointing to tightening financial conditions, which are not favorable for stocks,” added Kramer.

On the public health front, Michigan and Minnesota are leading the nation by new COVID-19 cases on a per capita basis and federal medical workers are traveling to Minnesota to support hospital staffing. Cases are up 25% in the last two weeks nationally, and up more than 40% in those states and 12 others. Overall, despite the arrival of vaccines in spring that can stop hospitalization and death, more Americans have died of COVID in 2021 than in 2020, the Times reported, as many unvaccinated people succumbed to the illness.

However, one of the bigger picture stories of the last few days has been the rise in real, or inflation-adjusted, yields. The 10-year yield on Treasury-inflated-protected securities closed above -1% for the first time in three weeks on Wednesday.

“I suspect they’ll stay negative for the rest of my career so while higher real yields are likely, I suspect that this is a trade rather than a structural long-term journey given likely long-term financial repression,” said Jim Reid, head of thematic research at Deutsche Bank.

See: Falling real yields are a key to the stock-market rally: What investors need to know

Which companies are in focus?
  • Gap Inc.
    GPS,
    -21.52%

    on Tuesday blamed “significant” supply-chain constraints as it cut its full-year earnings guidance and reported third-quarter results that fell short of expectations, sending its shares sharply lower after hours.

  • E-commerce platform Global-e Online Ltd. GLBE, +0.40% announced it will acquire technology Flow Commerce Inc. in a deal valued up to $500 million.

  • Johnson & Johnson JNJ said Wednesday its one-dose COVID-19 vaccine has been granted full approval by Health Canada, marking its first major regulatory approval.

  • Shares of Deere & CoDE jumped Wednesday, after the agricultural and construction equipment company reported fiscal fourth-quarter profit and sales that rose above expectations, as strong demand for farm and construction equipment helped offset cost of sales growth that outpaced sales growth amid supply-chain challenges.

  • GameStop Corp. GME said Wednesday that it will report fiscal third-quarter earnings results on Dec. 8, after the closing bell. 

  • Cathie Wood’s ARK funds sold Tesla TSLA to increase their stake in Zoom Video Communications ZM, after the poorly received results by the video communications company

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