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Stocks May Benefit From Continued Drop In Treasury Yields

By Investors Hub

The major U.S. index futures are pointing to a higher opening on Friday following the mixed performance seen in the previous session.

A continued drop by treasury yields may generate early buying interest on Wall Street, with the ten-year yield pulling back further off the four-year closing high set on Wednesday.

Trading activity may be somewhat subdued, however, as a lack of major U.S. economic data is likely to keep some traders on the sidelines.

Remarks by several Federal Reserve officials may impact trading amid lingering concerns about the outlook for interest rates.

After seeing strength for much of the session, stocks turned mixed in afternoon trading on Thursday. The Dow and the S&P 500 managed to end the day in positive territory, but the tech-heavy Nasdaq edged modestly lower.

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While the Nasdaq dipped 8.14 points or 0.1 percent to 7,210.09, the Dow climbed 164.70 points or 0.7 percent to 24,962.48 and the S&P 500 inched up 2.63 points or 0.1 percent at 2,703.96.

The strength seen in morning trading came amid a rebound by treasuries, which came under pressure following the release of the minutes of the Federal Reserve’s latest monetary policy meeting on Wednesday.

The yield on the benchmark ten-year note, which moves opposite of its price, is pulling back off the four-year closing high set in the previous session.

On the U.S. economic front, a report released by the Labor Department unexpectedly showed a modest decrease in first-time claims for U.S. unemployment benefits in the week ended February 17th.

The report said initial jobless claims dipped to 222,000, a decrease of 7,000 from the previous week’s revised level of 229,000.

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The drop surprised economists, who had expected jobless claims to come in unchanged compared to the 230,000 originally reported for the previous month.

A separate report from the Conference Board showed a bigger than expected increase by its index of leading economic indicators in the month of January.

The Conference Board said its leading economic index jumped by 1.0 percent in January after climbing by 0.6 percent in December. Economists had been expecting another 0.6 percent increase.

“While the recent stock market volatility will not be reflected in the U.S. LEI until next month, consumers’ and business’ outlook on the economy had been improving for several months and should not be greatly impacted,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at the Conference Board.

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He added, “The leading indicators reflect an economy with widespread strengths coming from financial conditions, manufacturing, residential construction, and labor markets.”

Gold stocks showed a significant move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 1.6 percent. The weakness in the sector came despite a modest increase by the price of gold.

Considerable weakness also emerged among banking stocks, as reflected by the 1.4 percent drop by the KBW Bank Index.

Tobacco and telecom stocks also saw notable weakness, while energy stocks moved sharply higher amid an increase by the price of crude oil.

Crude oil for April delivery jumped $1.09 to $62.77 a barrel following the release of a report showing an unexpectedly weekly drop in crude oil inventories.

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Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

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