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Before the Bell - This week in the stock market, equities have continued the recent pattern: we might call it up, down, and all around -- often within the same session. Yesterday once more, it was the fluctuation of Treasury note and bond yields that moved the needle for stocks. These yields had backtracked somewhat on Monday and stocks rallied strongly. However, yesterday, yields rose anew for the most part and the NASDAQ Composite, in particular, tumbled in response.  A dull report on private-sector job creation from Automatic Data Processing (ADP), though, helped the Dow Jones Industrial Average to stabilize for much of the day, before it, too, slumped into the close. 


Weekly jobless claims lead off the economic news this morning. First-time filings came in at 745,000 for the latest seven-day filing period, versus 736,000 a week before. Consensus was for no change. The roughly on-target news on jobless claims and a flattish showing in Treasury note yields now seem to be setting the stock market up for a muted opening when trading resumes.


In other news, yesterday, as indicated, ADP's private payroll data for February showed that the nation had added just 117,000 private-sector jobs last month, about half the 225,000 increase expected. That weak showing did help note and bond yields to pare some of their gains over the course of the day. At the same time, the Institute for Supply Management noted that its survey on the services sector came in at 55.3 in February, down from 58.7 in January. Still, this was a rather strong report.  Meantime, what was worrisome for those investors fretting about a possible rise in inflation was the fact that the report noted a steep jump in the prices paid index, one of that survey's key  components.


Regarding the stock market, after the Dow opened higher Wednesday, it would largely remain in the plus column until the final hour of trading when selling ensued bringing the blue chips to a moderate closing loss of 121 points. Things were different on the NASDAQ. That composite, which has been under pressure for some days now, on a flight from technology, fell sharply and continuously throughout the day, finally closing at session lows, with a staggering decline of 361 points. That setback pushed the NASDAQ to a close of 12,997. At its 2021 peak, it was 14,175.


Looking ahead, it is likely to remain mostly about Treasury yields for another few sessions. That makes tomorrow's monthly survey on employment and unemployment all the more critical. A strong jobs issuance, especially if it is accompanied by a jump in average hourly wages, could cause Treasury yields to rise further on inflation fears. That likely would hurt stocks. Conversely, a weaker employment report might relieve some pricing fears, but engender worries about the health of the economic recovery. Also of note, next week will bring reports on consumer and producer price inflation in February. A big rise in January's Producer Price Index initiated the rally in Treasury yields last month.


Finally, yesterday brought the release of the Federal Reserve's Beige Book. This anecdotal read on the economy saw mixed observations on inflation, with some retailers seeing increased ability to raise prices, while others noted continued difficulty on that front.  – Harvey S. Katz, CFA

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.