Stock fall as bond yields push higher

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U.S. stocks extended losses early Thursday as bond yields charged forward. The moves followed data on the labor market that disappointed before the open and confirmation from the European Central Bank of its intention to raise interest rates next month.

The S&P 500, Dow Jones Industrial Average, and Nasdaq each fell roughly 0.5% at the start of trading.

Weekly filings for unemployment insurance totaled 229,000 last week, the most since January, and a sign of potential stress building in the labor market. Ahead of this data, all three major indexes were pointing to gains north of 0.4% at the open.

Oil prices were retreated slightly but held above $120 per barrel, and the U.S. 10-year Treasury yield inched higher to 3.06%, north of the 3% level the 10-year breached earlier this week for the first time since early May.

Moves in early trading Thursday come after a down day on Wall Street that saw stocks resume losses after back-to-back sessions of gains. On Wednesday, the S&P 500 shed 1% while the Dow and Nasdaq fell roughly 0.8% and 0.7%, respectively.

Investors continue to look for clues on how the economy is faring amid tighter financial conditions and how aggressive the Federal Reserve rate hiking cycle may get before a potential pause.

The latest weekly jobless claims report follows strong May employment data last Friday that likely signaled to policymakers current labor market conditions can withstand further monetary tightening. Central bank officials have taken cues from the labor market on the tempo of rate increases as it fights inflation, with policy aimed to cool labor demand just enough not to push the jobless rate too high.

“The rise of initial unemployment claims does fit with anecdotal evidence provided by CEOs that they are closely watching their head counts which often covers up for their actions where they are quietly giving out pink slips,” FWDBONDS Chief Economist Christopher S. Rupkey said in a morning note. “One thing is for certain, joblessness has nowhere to go but up with inflation boosting costs for every company across the country and cost control measures must be implemented which will likely fall on the backs of labor.”

Investors are bracing for the Bureau of Labor Statistics’ latest Consumer Price Index (CPI) on Friday – a focal point on the economic data from this week. May’s reading is projected to show inflation slightly abated in May from April’s elevated 8.3% rate, with consensus economists looking for headline inflation to rise at a 8.2% annual rate for May, and by 5.9% excluding food and energy prices.

NEW YORK, NEW YORK - JUNE 08: Traders work on the floor of the New York Stock Exchange during morning trading on June 08, 2022 in New York City. The Dow Jones, S&P and Nasdaq opened down for the first time in three days. (Photo by Michael M. Santiago/Getty Images) — Traders work on the floor of the New York Stock Exchange during morning trading on June 08, 2022 in New York City. (Photo by Michael M. Santiago/Getty Images)

Before the open, traders weighed a report indicating the highly-anticipated initial public offering of Jack Ma’s Ant Group was on the horizon. According to Bloomberg News, China is expected to allow the Alibaba (BABA) affiliate to proceed with the listing, a sign that regulators may be dialing on a tech crackdown that halted the IPO two years ago.

Elsewhere in markets, shares of Tesla (TSLA) were up 1% following an upgrade from UBS to Buy in a report that also said the electric vehicle giant is “best positioned to become one of the top-3 global car makers by 2030.”

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9:34 a.m. ET: Equities fall as bond yields push higher

Here’s where the major indexes traded at the start of Thursday’s main session:

S&P 500 (^GSPC): -18.04 (-0.44%) to 4,097.73
Dow (^DJI): -104.05 (-0.32%) to 32,806.85
Nasdaq (^IXIC): -88.96 (-0.73%) to 12,086.27
Crude (CL=F): -$0.66 (-0.54%) to $121.45 a barrel
Gold (GC=F): -$4.30 (-0.23%) to $1,852.20 per ounce
10-year Treasury (^TNX): +3.7 bps to yield 3.0660%

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8:36 a.m. ET: Jobless claims hit five-month high last week

The latest report on weekly jobless claims suggest some softening in the U.S. labor market.

Initial filings for unemployment insurance rose to 229,000 last week, up 27,000 from the prior week and the highest weekly total since the week of January 14. Economists expected initial claims would total 206,000, according to estimates from Bloomberg.

Continuing claims for unemployment insurance stood at 1.306 million for the week ending May 28, unchanged from the prior week.

Initial claims were a closely-watched source of stress in the labor market in the earliest days of the pandemic, totaling more than 6 million in a single week at the peak in April 2020.

Claims have since moved down to multi-decade lows, but economists have flagged this data series as offering the best real-time window into the state of the U.S. labor market. Against this backdrop, the recent rise in initial claims bears close watching into the summer months.

—Myles Udland, senior markets editor

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