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MARKET SNAPSHOT

© Angela Weiss/AFP/Getty Images Angela Weiss/AFP/Getty Images

The Dow Jones Industrial Average closed slightly lower Thursday, breaking a 5-day win streak, after gains in cyclical stocks seen benefiting from economic recovery failed to offset early losses in technology stocks, despite upbeat economic data on employment and service sector activity.

Video: Dow erases gains amid inflation jitters (Yahoo! Finance)

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How did benchmarks performing?

  • The Dow Jones Industrial Average closed down 23.34 points, or 0.1%, at 34,577.04
  • The S&P 500 stumbled 15.27 points, or 0.4%, to 4,192.85.
  • The Nasdaq Composite also slid, dropping 141.82 points, or 1%, to 13,614.51.

On Wednesday, the Dow rose 25.07 points to eke out a fifth straight gain; the S&P 500 climbed 6.08 points, or 0.1%, to 4,208.12; the Nasdaq Composite Index advanced 19.85 points, or 0.1%, to 13,756.33.

What’s drove the market?

Cyclical stocks, which stand to benefit most as the economy picks up steam, were top performers Thursday. The S&P 500 energy sector rose 0.3%, while financials, which stand to gain as bond yields rise, were also up just over 0.3%. Industrials fell 0.2%.

But upbeat economic data helped push up U.S. Treasury yields which weighed on tech and other growth-oriented stocks that are more sensitive to rising interest rates.

The Institute for Supply Management said its services survey rose to a record 64% in May from 62.7% in April. Also Thursday, IHS Markit said its final U.S. services purchasing managers index reading came in at 70.4 in May, its highest level since data began in 2009. A figure above 50 indicates growth in activity.

“The summer services revival is starting to take hold. Looking ahead, reopenings and rising confidence that the U.S. has effectively contained the pandemic will fuel a services boom,” said Oren Klachkin, lead U.S. economist at Oxford Economics, in a note.

Investors were also sifting a raft of jobs-related data released Thursday for clues to Friday’s May employment report from the U.S. Labor Department.

Private-sector employment jumped by 978,000 in May, according to the ADP National Economic Report, well above forecasts from economists surveyed by The Wall Street Journal who expected a gain of 680,000 jobs. Economists noted, however, that the ADP report hasn’t been a reliable guide to official jobs data over the course of the COVID-19 pandemic.

Meanwhile, weekly data on applications for unemployment benefits also painted a positive picture for the labor market. First-time claims for benefits fell to 385,000 last week, the first reading below 400,000 since the pandemic began.

But the main event for the week will be the release Friday of the May jobs report, particularly after a much weaker-than-expected rise in April payrolls underlined concerns about labor shortages and inflationary pressures.

See: A lot is riding on May jobs report after recent U.S. hiring lull. 

“The U.S. economy is roaring back to life amid a successful vaccine program and the reopening of businesses as pandemic restrictions are lifted. These data points bode well for tomorrow’s nonfarm payrolls which will be key in deciding the Fed’s next steps,” said Fiona Cincotta, senior financial markets analyst at City Index.

Expectations of an earlier Federal Reserve move to tighten monetary policy as economic growth speeds up was reflected in a stronger dollar Thursday, but New York Federal Reserve president, John Williams, said “now is not the time” to tighten monetary policy by tapering the central bank’s asset purchases.

Although the broader market moves have been subdued this week, so-called meme stocks, which have been heavily influenced by social media and not financial fundamentals, have been on a tear, including AMC Entertainment Holdings GameStop Corp. and Bed Bath & Beyond raising concerns anew about bubbles forming in parts of the financial system amid the low-interest-rate environment. Those stocks were whipsawed both ways on Thursday, however, after AMC announced plans to sell a slug of new shares, then announced it had completed the sale.

Data also appeared to show that many retail traders rotated their meme stock positions Thursday morning, cashing out of AMC in the morning and adding to another favorite; BlackBerry The Canadian mobile device maker saw its heaviest trading volume ever, according to Dow Jones data.

“Meme stocks are not aligned with any fundamentals and this wild wild west trading will probably last a little while longer,” wrote Edward Moya, senior market analyst at OANDA. “Eventually, the SEC will address this fervor, as this is not healthy for most market participants.”

Which companies were in focus?

  • AMC shares plunged more than 17.9% after it said Thursday morning that it completed a sale of up to 11.55 million shares to B. Riley Securities Inc. and Citigroup Global Markets Inc., it’s second major stock sale in the last three days. But after surging to gain as much as 7% in the afternoon session, AMC fell off again to finish down for the first time this week. AMC shares are still up 3,000% year-to-date through Wednesday’s close. Shares were briefly halted due to volatility.
  • Tesla Inc. TSLA is recalling nearly 6,000 cars because brake caliper bolts may be lose and cause a loss of tire pressure, Reuters reported. Tesla shares fell 5.3%.
  • Shares of Express Inc. EXPR fell 19.5%, after the apparel retailer reported a narrower-than-expected fiscal first-quarter loss and revenue that rose above forecasts, as the company experienced an “inflection point” after Easter.
  • BJ’s Wholesale Club Holdings Inc. BJ said Thursday it is now offering Citizens Pay, a buy-now-pay-later payment option for purchases of more than $99. Shares were up 0.4%.
  • Furniture retailer Conn’s Inc. shares CONN soared 27.3%, after the company posted first-quarter earnings that crushed expectations. 
  • Delta Air Lines Inc. on Thursday said it expects to generate a pretax profit in the second half of 2021, driven by recovering demand for leisure, corporate and trans-Atlantic flights after a long period of weakness caused by the coronavirus pandemic. Shares fell 3.4%.
  • American Airlines Group Inc. said Thursday it still expects second-quarter system capacity, as measured per total available seat miles, to be down 20% to 25%, and for revenue to be down about 40% compared with the second quarter of 2019, the year before the pandemic decimated travel. American shares also declined 3.4%.

What did other markets do?

  • The yield on the 10-year U.S. Treasury note rose 4 basis points to 1.628%.
  • The ICE U.S. Dollar Index a measure of the currency against a basket of six major rivals, rose 0.6%.
  • Oil futures gave up early gains, with the U.S. benchmark down 0.03% to settle at $68.81 a barrel, while gold futures retreated1.9%.
  • In European equities trading, the pan-Continental Stoxx Europe 600 was flat, while London’s FTSE 100 dropped 0.6%.
  • In Asia, the Shanghai Composite fell 0.4%, while the Hang Seng Index dropped 1.1%; Japan’s Nikkei 225 rose 0.4%.
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