Market Snapshot: Stocks stage tentative rebound as traders try to shake off rising yields, geopolitics

May 16
21:52 2018

U.S. stocks edged higher on Wednesday morning, as investors appeared to have shaken off fresh North Korea worries as well as rising bond yields.

Pyongyang overnight signaled its leader, Kim Jong Un, might pull out of next month’s summit with President Donald Trump if the U.S. insists on denuclearization for the isolated nation.

What are the main benchmarks doing?

The equity market has scored significant gains so far this month, but it suffered a sizable drop on Tuesday, as the Dow halted an eight-session winning streak.

On Wednesday, The Dow Jones Industrial Average DJIA, -0.09% was flat at 24,705.

The S&P 500 index SPX, +0.10% was up 4 points, or 0.2%, to 2,715, with seven of its 11 main sectors trading higher. Materials, consumer staples and consumer discretionary stocks were leading gains.

Meanwhile, the Nasdaq Composite COMP, +0.25% advanced 25 points, or 0.3%, to 7,376.

What’s driving markets?

The stock market seems to have turned a corner this month, overcoming some concerns about inflation, rising interest rates, trade fights and geopolitical tensions. The Dow is up 2.2% in May so far and roughly flat for the year.

Even so, rising rates appear to be peeling some investors away from stocks. Tuesday’s selloff was blamed in part on the 10-year Treasury note’s yield TMUBMUSD10Y, +0.39% rise to a seven-year high above 3%. The 10-year yield rose 1 basis point on Wednesday to trade at 3.0862%.

What are strategists saying?

“Recent market action reflects a balance between risk and reward for investors. On the positive side, there is still growth momentum and solid earnings. But these are counterbalanced with risks on policy issues, trade talks and geopolitics like North Korea,” said Lisa Erickson, head of the traditional investments group at U.S. Bank Wealth Management.

Geopolitical risks are “rising again as North Korea pulls out of planned talks with South Korea and threatens to do the same with Donald Trump,” said Richard Perry, a Hantec Markets analyst, in a note.

“Kim Jong Un is apparently unhappy over the denuclearization program. As yet, there has only been a minor safe-haven move,” Perry added.

What economic news is on tap?

Construction on new houses dropped 3.7% in April. The annual rate of new homes being built declined to 1.29 million last month from a revised 1.34 million pace in March that was the strongest since mid-2007.

Industrial production rose 0.7% in April, slightly above Wall expectations of a 0.6% increase.

Check out: MarketWatch’s Economic Calendar

Which stocks are in focus?

Shares in Macy’s Inc. M, +8.94% jumped 8% after the retailer reported upbeat sales and outlook.

See: Macy’s stock is rising but same-store sales are not

Shares of Micron Technology Inc. MU, +4.26% are up 3.5% in premarket trading after RBC analyst Amit Daryanani initiated coverage of the stock with an outperform rating and an $ 80 price target.

What are other markets doing?

Gold futures GCM8, -0.22% were roughly unchanged after earlier trading higher.

European stocks SXXP, +0.28% were struggling for direction, while Asian markets finished flat to lower.

Oil futures CLM8, -0.35% lost ground, and the ICE U.S. Dollar Index DXY, +0.22% was gaining.

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