Dow clings to gain and Nasdaq slips ahead of Fed update as 10-year yield tests 1.3%

What’s driving the market?

Investors were focused on the pace of the U.S. economic recovery and the future of extremely supportive monetary policies ahead of the afternoon release of minutes of the central bank’s mid-June rate-setting meeting.

At its June 15-16th meeting, policy makers moved up their forecasts for a policy interest rate increase and began talking about when it would be appropriate to discuss the unwinding of its asset purchases of $120 billion a month, which could be a drag on Treasury rates.

Investors have heard from virtually every Fed official since the meeting, leaving the market with a good sense of where the central bank stands, some analysts have said. The Fed has signaled it wants to see a series of good monthly employment reports before scaling back its large-scale purchases of Treasurys and mortgage-backed securities or raising interest rates, which currently stand at a range between 0% and 0.25%.

Read: June jobs report bolsters case for Fed to start slowing down bond-buys this year

“First, we are still looking for a definition of ‘significant further progress’ in the labor market. I would like to hear how the Fed is framing this up,” Gene Tannuzzo, global head of fixed income at Columbia Threadneedle Investments, wrote in emailed comments ahead of the minutes release.

“Secondly, we would like to learn more about the conversation that led many Fed members to revise up their interest rate expectations,” Tannuzzo said, adding that if the Fed is growing more confident about the labor-market recovery, “this could spook the market into thinking rates should be higher.”

A Labor Department report Wednesday showed job openings in the U.S. rose to a record 9.21 million in May, reflecting a rising demand for labor as the economy fully reopens and businesses scramble to keep up with soaring sales for their goods and service.

“Hiring is still a problem though as they fell by 85,000 in May and after a sharp jump in the two prior months of 609,000, the number of quitters fell by 388,000,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group, in a daily note.

Bottom line, we’ll of course see how these numbers mesh in coming months as kids go back to school, enhanced unemployment benefits expire and the vaccine gets further rolled out, but of course at a sharply slowing pace, he said.

The report on job availability has set a record for three straight months and may be starting to shake the confidence of investors anticipating a robust economic bounceback from the COVID-19 pandemic.

The Dallas Federal Reserve said the U.S. economy may be as little as one month away from full employment in a new research report, arguing that the labor-market should be measured by a “neutral” standard, not pre-pandemic levels.

Even so, concerns about the recovery have been reflected, at least partly, in a recent slump in longer-dated bond yields.

The decline in Treasury yields, with the 10-year Treasury note TMUBMUSD10Y, 1.312% falling to 1.31% on Wednesday had emboldened buyers in yield-sensitive segments of the stock market, like companies in the technology-heavy Nasdaq Composite and growth stocks. However, markets may be growing concerned that buying government bonds implies that some investors harbor doubts about the stock market’s ability to deliver further record rallies.

Bank shares were mixed, with Goldman Sachs GS, -0.53% stock lower and JPMorgan Chase JPM, +0.16% advancing modestly, as investors consider the possibility of lower bond yields hurting the financial sector’s profitability.

Separately, crude-oil futures CL.1, -1.91% pivoted to a sharp decline from a modest gain in the wake of a disagreement within the Organization of the Petroleum Exporting Countries and their allies — a group known as OPEC+ — on raising output. WTI crude touched a six-year high briefly on Tuesday before retreating. 

See: What the OPEC standoff means for oil prices and financial markets

Investors also have grown wary of Chinese technology companies listed on U.S. markets as Beijing tightens its control over the country’s largest tech companies. Didi Global Inc. DIDI, -3.52% was down 6.5% Wednesday, after tumbling 19.6% on Tuesday in the wake of last week’s New York IPO.

Which companies are in focus?

• AMC Entertainment AMC, -7.80% and GameStop Corp. GME, -4.58% shares were lower Wednesday, extending losses into a 4th day in a row.
• Authentic Brands Group, which owns teen retailer Forever 21, has filed to go public. It plans to trade on the New York Stock Exchange under the ticker “AUTH.”
• Planet Labs Inc. is set to go public through a merger agreement with special-purpose acquisition company, or SPAC, dMY Technology Group Inc. IV  DMYQ.UT, +2.03%  in a deal that values Planet at about $2.8 billion. 
• Shares of Coinbase Global Inc. COIN rose 1.3% Wednesday, after Oppenheimer analyst Owen Lau said he was a little more bullish on the cryptocurrency trading platform, citing expectations of strong second-quarter results.
• Chobani announced Wednesday that it has filed a confidential draft registration statement for a proposed initial public offering with the Securities and Exchange Commission. 
• Shares of Moderna Inc. MRNA were down 4.4% Wednesday after the company said it began dosing patients in a Phase 1/2 clinical trial evaluating an experimental seasonal flu vaccine. 
• Shares of Biohaven Pharmaceutical Holding Co. Ltd. BHVN were up about 13% Wednesday after the company said its new migraine treatment brought in $93 million in sales in the second quarter of 2021.

How are other assets trading

• The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, rose 0.2%.
• The U.S. oil benchmark CL00 fell 1.9% to $71.94 a barrel on the New York Mercantile Exchange. Gold futures GC00 rose 0.5% to $1,802 an ounce.
• European equities closed higher, with London’s FTSE 100 UKX up 0.7% and the Stoxx Europe 600 index SXXP up 0.8%, landing its second-highest finish ever.
• In Asia, the Shanghai Composite SHCOMP rose 0.7%, while Hong Kong’s Hang Seng Index HSI fell 0.4% and Japan’s Nikkei 225 NIK lost 1% on the session.

William Watts contributed reporting