U.S. stock futures wilt before Thanksgiving as financial conditions tighten

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US stock index futures lost ground on Wednesday, extending losses on Thursday following a flurry of economic data in the run-up to the Thanksgiving holiday.

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On Tuesday, the Dow Jones Industrial Average (DJIA),
+0.55%
35814, S&P 500 SPX, up 195 points, or 0.55%,
+0.17%
rose 8 points, or 0.17%, to 4691, while the Nasdaq Composite comp,
-0.50%
fell 80 points, or 0.5%, to 15775.

what is driving the market
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One of the stories of the past few days has been an increase in real, or inflation-adjusted, yields. The 10-year yield on Treasury-inflated-protected securities closed above -1% on Wednesday for the first time in three weeks. It comes as Europe grapples with a wave of COVID cases, and as markets take a scathing explanation for the reappointment of Jerome Powell to chair the Fed.

Jim Reid said, “I suspect they will remain negative for the rest of my career, hence the potential for higher real yields, I suspect this is a trade-off rather than a structural long-term journey given the potential for long-term financial suppression.” ” , head of thematic research at Deutsche Bank.

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Falling real returns are key to stock-market rally: What investors need to know

Investors were going through a pre-Thanksgiving data dump on Wednesday. Claims for unemployment benefits for the first time fell to 199,000 from 71,000 last week. Economists surveyed by The Wall Street Journal estimated that initial jobless claims would total 260,000 seasonally adjusted.

The government said on Wednesday that orders for US durable goods – products expected to last at least three years – fell 0.5% in October. Economists polled by the Wall Street Journal had forecast a 0.3% increase. Yet the decline stemmed from lower orders for passenger aircraft as a whole, a volatile category that often distorts the level of demand underlying the economy.

The US trade deficit narrowed 14.6 per cent to $82.9 billion in October. The pace of growth in the third quarter was revised down to an annualized rate of 2.1% against an initial estimate of 2%.

Still at 10 a.m. Eastern is doing readings on personal savings and spending, including the Federal Reserve’s favorite inflation indicator, as well as the latest readings on new-home sales and the University of Michigan’s Consumer Sentiment Index. Minutes of the Fed’s November meeting are due at 2 p.m.

Mott Capital Management’s Michael Kramer said in a blog post that he expects Fed minutes to show an alternative to a sharp taper being discussed in December — allowing the market to “break Powell into submission and not taper sharply.” “Give me a few weeks.

“Looking at the broad average this may not sound obvious, but in bond ETFs, dollar indexes and the Treasury market, you are seeing massive changes. All of this is pointing to tight financial conditions, which are favorable for stocks.” There are no,” Kramer said.

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