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MARKET SNAPSHOT

U.S. stock benchmarks traded lower early Friday, and the Dow was struggling to overcome a sharp decline in blue-chip component Nike Inc., on the heels of two strong sessions for the broader equity market.

How are stock-index futures trading?

  • The Dow Jones Industrial Average fell 59 points, or 0.2%, to 34,704.
  • The S&P 500 declined 11 points, or 0.2%, to 4,439.
  • The Nasdaq Composite Index declined 103 points, or 0.7%, to reach 14,949.

On Thursday, the Dow rose 507 points, or 1.48%, to 34765, its biggest two-day point and percentage gain since Mar. 8, 2021, according to Dow Jones data. The S&P 500 increased 53 points, or 1.21%, to 4449, and the Nasdaq Composite gained 155 points, or 1.04%, to 15052.

What’s driving the market?

It was a soft start for U.S. stocks Friday but the opening weakness was less severe than index futures trading had indicated, with the S&P 500 and Dow trading around 0.2% lower.

The technology-laden Nasdaq Composite was under pressure, however, as bond yields climbed, putting pressure on the discount rate used for equity valuations.

Friday’s lackluster action comes after two strong days of gains for Wall Street stocks following the Federal Reserve’s policy meeting on Wednesday, as investors reacted to indications by the central bank that start of the tapering of its bond purchases might be near.

Indeed, Cleveland Federal Reserve President Loretta Mester said she backed starting tapering of the Fed’s monthly purchases of Treasurys and mortgage-backed securities starting in November, with an eye toward ending it in the middle of 2022. George isn’t presently a voting member of the Federal Open Market Committee, but she will be one next year.

Later Wednesday, Federal Reserve Chair Jerome Powell is due to give opening remarks at a “Fed Listens” event, where a number of other members also may comment on the economy.

Meanwhile U.S. Treasury yields have started to mount a steady climb higher in the wake of the Fed’s policy statement on Wednesday, with the benchmark 10-year Treasury note rate at 1.44% on Friday.

“Something has clearly changed and positioning on rates is shifting. U.S. 10yr yields jumped to 1.44%, posting their biggest one-day gain since March, whilst 30yr bond yields jumped the most in a single day since March 2020,” said Neil Wilson, chief market analyst for Markets.com. Thursday also saw several global central banks meet, with rate hikes out of Norway and Turkey.

“Although the Fed and [Bank of England] remain fairly cautious and the dogma of transitory inflation persists, they’re starting to move beyond pandemic-era emergency mode. Investors see this and are moving too — rates steepening again as they did earlier this year,” said Wilson.

Investors continue to watch for the latest on China’s Evergrande, a property developer that helped to spark a rout on Monday, amid fears over global contagion from the highly leveraged company. However, the market appears to be betting that China will help limit the damage from the developer.

As of Thursday, bondholders still hadn’t received any money from Evergrande which was due to make a $83.5 million interest payment on dollar bonds, The Wall Street Journal reported, citing sources.

The company has a 30-day grace period to make a payment, but barring that, Evergrande could trigger a default. Those shares fell 12% in Hong Kong on Friday. Elsewhere, media reports said Friday that the company’s electric-vehicle unit hadn’t paid suppliers in months, with employees also receiving no salary for September.

Elsewhere, Friday’s U.S. data calendar is light with August new home sales due at 10 a.m. Eastern.

Which companies are in focus?

  • Shares of Nike Inc. fell 6.7% after the sportswear maker reported quarterly sales that fell short of Wall Street expectations, and said wages and overhead expenses weighed on revenue.
  • Costco Wholesale Corp. shares rose 1.5% as the retailer topped $60 billion in net sales in a single quarter for the first time, hit $5 billion in annual profit and grew at its fastest pace in more than 20 years.

How are other assets trading?

  • The yield on the 10-year Treasury note rose 2 basis points to 1.428%.
  • The ICE U.S. Dollar Index a measure of the currency against a basket of rivals, fell 0.3% to 93.15.
  • Oil futures were steady, with the U.S. benchmark barely higher at $73.34 a barrel. Gold futures rose 0.2% to $1,754 an ounce.
  • In Asia, Hong Kong’s Hang Seng Index dropped 1.3%, while China’s CSI 300 index finished unchanged. The Nikkei 225 index jumped 2%.
  • In Europe, the Stoxx Europe 600 was ready to break with three straight days of gains, down 0.6%, while the FTSE 100 index slipped 0.2%.

Video: Could the Fed announce a taper this week? (CNBC)

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