Stocks fall after jobless claims data disappoints

Stocks fell on Thursday after a new report on the U.S. labor market sharply disappointed, ending a streak of better-than-expected economic data and underscoring the incomplete economic recovery still taking place amid the ongoing pandemic.

The Dow fell more than 200 points, or 0.7%, around noon in New York, after component company Walmart slid after posting disappointing fourth-quarter earnings. The Nasdaq underperformed for another session, dipping by more than 1% as tech stocks gave back more gains and a rotation into cyclical stocks extended further. Treasury yields ticked higher, and the benchmark 10-year yield hovered around the one-year high of 1.31% after a rapid run-up this week.

The drop in U.S. equities came after the Labor Department’s weekly report showed initial jobless claims unexpectedly jumped to a one-month high last week, as the U.S. labor market recovery stagnated. But new jobless claims data aside, an increasing number of economic and earnings data have pointed to a strong recovery coming out of the pandemic, even with the national vaccination program still under way. Retail sales surged by the most in seven months in January, handily exceeding expectations as government stimulus lifted consumer spending at the start of the year. And on the monetary policy side, the Federal Reserve’s latest meeting minutes suggested the central bank would maintain its aggressive asset purchase program and low interest rate policies to support the economy coming out of the pandemic.

“What has happened is that these cyclical rotations continue to be supported by, obviously the stimulus program that put the consumer at the front end of what may come down the road,” Omar Aguilar, Charles Schwab investment manager, told Yahoo Finance. “And therefore it’s not surprising that you actually see higher yields in Treasuries, and you actually see risky assets being in high demand.”

Though stocks reacted mutedly to the latest set of positive headlines including the retail sales report, the flurry of better-than-expected data has helped keep a floor under risk assets, some strategists noted.

“We’ve seen a two steps forward, one step back approach. Which means that the market trends higher and higher, we see a pause, we see a very brief pullback, and then the market takes a leg up again. I think we’re going to continue to see that, because there’s some positive news and positive headlines that we’re either sitting on or are in the midst of right now,” Jonathan Corpina, Meridian Equity Partners senior managing partner, told Yahoo Finance. “We’re talking about vaccination program roll-out – we’re seeing that each day, it’s getting much more successful. You see the retail numbers like today, that ties into stimulus. Stimulus money is going in the right direction. Earnings expectations have been tepid so far, and I think that’s widely accepted by markets, and that’s viewed as good news.”

Thursday morning, Walmart (WMT) posted fourth-quarter earnings that trailed estimates, though e-commerce and overall sales grew strongly. Thursday afternoon, companies including Planet Fitness (PLNT) and Roku (ROKU) are poised to report quarterly results, rounding out what has so far been a steady stream of better-than-expected fourth-quarter reports despite the ongoing pandemic.

Elsewhere, the House Financial Services Committee began holding a hearing at noon eastern on Thursday over recent market volatility involving GameStop and other heavily shorted stocks. Individuals including Vlad Tenev, CEO of the popular online brokerage firm Robinhood, as well as Citadel CEO Kenneth Griffin and Reddit co-founder Steve Huffman were among those testifying in the hearing.

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12:01 p.m. ET: Stocks hold lower intraday

The three major indexes remained lower with the afternoon session under way on Thursday.

The S&P 500 was lower by 0.9%, as the energy, information technology and communication services sectors underperformed. The utilities sector was the only one still in slightly positive territory.

The Nasdaq fell more than 1.3% as each of the Big Tech FAANG names declined, though Amazon was a relative outperformer and was only a tick below the flat line. The Dow dropped more than 250 points, or 0.9%, as component company Walmart sank 5% after earnings.

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