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The Dow Jones Industrial Average and the S&P 500 index flipped into positive territory Thursday afternoon, after a morning slide, as investors parsed improving economic data as the country emerges from the COVID pandemic.

The improving economic data has prompted a sharp rise in U.S. Treasury yields in the past couple of months and is leading to end-of-quarter fund rebalancing out of stocks and into bonds and yields have drifted lower this week.

How are stock benchmarks performing?
  • The Dow Jones Industrial Average DJIA, +0.32% was trading up 51 points, or 0.2%, at around 32,471, but had been down by as many as nearly 350 points at Thursday’s nadir at 32,071.41.
  • The S&P 500 SPX, +0.25% traded 4 points higher to reach 3,894, a rise of 0.1%, well off its intraday low at 3,853.50.
  • The Nasdaq Composite Index COMP, reached 12,952, down 10 points for a decline of 0.1%, but also shifting off session lows at 12,786.81, FactSet data show.

On Wednesday, the Dow closed 3 points lower, virtually unchanged at 32,420.06, the S&P 500 fell 21.38 points, or 0.6%, ending at 3,889.14, while the Nasdaq Composite Index shed 265.81 points to finish at 12,961.89, a decline of 2% and the small-capitalization Russell 2000 index RUT, +0.69% shed 51.42 points, or 2.4%, ending at 2,134.27.

What’s driving the market?

Markets are fighting to find higher footing as weekly first-time jobless claims hit the lowest level in over a year and a reading on fourth-quarter gross domestic product was raised to 4.3%, beating consensus estimates of 4.1%.

On the jobs front, the number of people seeking unemployment benefits for the week ended March 20 totaled 684,000, marking the first time the number has been below 700,000 since March, when the public-health crisis took a significant hold of the economy. Economists surveyed by Dow Jones had expected 735,000 applications from 770,000 in the period before.

The jury is out on what that upbeat data means for investors, with markets early on jolting lower because the economy suggests that inflation may indeed run hot, as some investors fear.

“In reality, a return to normal could already be priced in and when you consider that half of the Fed’s mandate is to support job growth, the signs of strength from today’s jobless claims read may actually have a perverse effect on the broader market,” wrote Mike Loewengart, managing director investment strategy at E-Trade Financial, in emailed remarks.

That said, investors may still take heart in the Federal Reserve’s stated commitment to lower interest rates until the economy fully recovers from the pandemic hit.

“Fed policy makers are still not alarmed by increases in yields to date, and have notably chosen not to dial up the degree of caution around the pace of the move in yields as a precautionary measure either (though this may reflect the fact that the bond market itself seems to be taking a breather),” wrote Evercore ISI’s Krishna Guha, in a Thursday note.

On Thursday, Fed Chairman Jerome Powell said that the rebound from COVID has taken shape faster than policy makers had expected but emphasized that the central bank would reduce accommodative measures only gradually.

“We will very gradually over time and with great transparency, when the economy has all but fully recovered, we will be pulling back the support that we provided during emergency times,” Powell told NPR, a day after his second day of congressional testimony to explain the health of the economy in the aftermath of the COVID pandemic.

“Investors also continue to mull over recent comments from central bankers about when emergency stimulus may be scaled back with the Bank of Canada having recently hinted at potentially sooner and Fed Chair Powell recently hinting at likely not for a while yet,” wrote Colin Cieszynski, chief market strategist at SIA Wealth Management.

The choppy trade in stock markets this week has been partly attributed to quarter-end rebalancing and a rotation in and out of sectors that are expected to perform better when the economy stages a more pronounced recovery from the COVID-19 pandemic.

However, few strategies have proven successful in recent trades, with growth stocks and many value-oriented names getting equally hammered in recent trading action.

The moves have come even as bond yields have slipped in the past week on growing concerns about extended COVID lockdowns in Europe, while the rise in yields so far this year is expected to lead to substantial selling of stocks and buying of bonds as funds rebalance, Sphia Salim, European rates strategist at Bank of America, was quoted as saying in the Financial Times. Some $88 billion is slated to be shifted from equities to bonds, BofA estimates.

Long-dated Treasury bond yields this week have fallen significantly though, with the 10-year benchmark note TMUBMUSD10Y, 1.618% yielding around 1.63%, compared with 1.729% at the end of last week.

Which stocks are in focus?
  • SunPower Corp. SPWR said Chairman and Chief Executive Tom Werner will retire from the company. Shares were trading 2.6% higher.
  • Chipotle Mexican Grill Inc. CMG said Thursday that it has invested in Nuro, an autonomous delivery company. The stock was up by about 0.3%.
  • Darden Restaurants Inc. DRI shares rose over 5% Thursday after the Olive Garden parent reported fiscal third-quarter earnings and sales that beat the Street.
  • Shares of United Airlines Holdings Inc. UAL rose in premarket trading Thursday, after the air carrier announced plans to resume more than 20 domestic flights, and to fly to Latin America more than 100% of its pre-pandemic schedule. Shares were up 3.3%.
  • AstraZeneca AZN, +1.52% revised the efficacy rate from the recent clinical trial on its coronavirus vaccine down slightly to 76% from 79%. U.S.-listed shares were up 1.2%.
  • Popular meme stocks GameStop Corp. GME, +39.75% was soaring 40% on Thursday and AMC Entertainment Holdings Inc. AMC, +20.62% was climbing 18.4%.
How are other assets faring?
  • The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, was up 1.4 basis point at 1.63%, compared with 1.729% to end last week. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, rose 0.3% at 92.83.
  • Oil futures retreated 3.3%, even as the cargo ship mishap in the Suez Canal looked set to linger for days, with the U.S. benchmark CL.1 off $2.02 to trade at $59.19 a barrel on the New York Mercantile Exchange.
  • Gold futures were higher. The April contract GCJ21 rose 0.4%, to reach $1,740.40 an ounce.
  • In Europe, the Stoxx 600 index SXXP fell less than 0.1%, while London’s FTSE 100 UKX closed 0.6% lower.
  • In Asia, the Shanghai Composite SHCOMP slipped 0.1%, Hong Kong’s Hang Seng Index HSI edged 0.1% lower and Japan’s Nikkei 225 NIK closed up 1.1%.