Rate Expectations Rise, Resulting In Mixed Stocks

Inflationary pressures could be here to stay as bond yields rose and weekly jobless claims fell below economists' expectations Thursday.

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There were increases of 141 points, or 0.4%, in the Dow Jones Industrial Average as well as 0.1% and 0.5% declines in the S&P 500 and Nasdaq Composite indexes, respectively.

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In the same vein, the Dow Jones Industrial Average rose 5 points, or 0.02%, while the S&P 500 fell 0.5% and the Nasdaq fell 0.7% in yesterday's session, both of which posted back-to-back losses.

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This is the first time since November that the 10-year Treasury yield has risen above 4% for the first time. The stock closed below the key psychological level of 4.063% on Thursday, but it rose to 4.063% on Friday. The increase in bond yields reduces the present value of the future cash flows that make up the company valuation when bond yields rise. As a result, this is particularly a problem for the shares of technology companies, which are expecting to make profits in the years to come.

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“The 10-year bond rate is unlikely to remain over 4% for a long period of time without having an effect on the economy, and we expect to see an increase in unemployment as we move forward in the year,” wrote Rhys Williams, chief strategist at Spouting Rock Asset Management.

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It has been reported that the U.S. Department of Labor reported 190,000 initial jobless claims for the week ending Feb. 25 after seasonally adjusted, indicating that the labor market remains resilient. FactSet reports that jobless claims dropped from 192,000 reported last week and were below the projections of economists at 197,000.

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Friday's services data will be closely watched by investors.

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It is expected that the ISM services index will be in the expansion zone, however given the importance of the service sector in the economy, the prices paid component will be of great importance in determining how prevalent and entrenched higher prices have become, according to Quincy Krosby, LPL Financial's chief global strategist.

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Economic data that have been stronger than expected and hawkish statements by Federal Reserve officials have raised expectations for higher interest rates in recent days as a result of stronger than expected economic data. Based on the CME FedWatch Tool, which is a tool that provides information about the probability of a 50-basis-point rate increase at the Federal Reserve's March meeting is now at 33.6%, up from 27% a week ago.

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Both Kroger (ticker: KR) and Macy's (M) reported results on Thursday, and retail earnings continue to be the topic of conversation.

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Macy's stock jumped 6.6% in after-hours trading after the department store company beat earnings expectations for the fiscal fourth quarter and provided upbeat guidance for the year ahead.

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The stock of Kroger rose 2.6% after the grocery store chain posted fourth-quarter adjusted earnings that exceeded expectations and provided better guidance than expected.

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NASDAQ-listed Salesforce (CRM) was up 12% on Thursday following the release of its fourth-quarter earnings which were in line with expectations on Wednesday. Dow Jones Market Data reports that the stock's strong performance has added 139 points to the DIJA so far today thanks to the stock's strong performance.