Dow aims to extend record climb but tech stocks wobble as jobless claims carve out fresh COVID low

What’s driving the market?

Initial unemployment claims in the U.S. fell to 498,000 for first time in pandemic era, pointing to an improving labor market but also raising questions for some investors about the pace of improvement and the specter of rapidly rising inflation. The weekly claims are better than the previous week’s total of 590,000, and come in better than Dow Jones estimate for claims of 527,000.

U.S. state continuing jobless claims rose 37,000 to 3.69 million and total U.S. continuing jobless claims dropped 404,509 to 16.2 million as of April 17.

“Claims have declined by 33% since the start of April, further confirmation that a recovery in the labor market is well underway,” wrote economists Nancy Vanden Houten and Greg Daco from Oxford Economics, in a report.

“We expect more evidence of that recovery in tomorrow’s April jobs report and look for an increase in payroll employment of 775,000,” the economists said.

In other U.S. economic reports, U.S. productivity rose at 5.4% annual rate in first quarter, while unit labor costs were down at a 0.3% rate over the same period.

Stocks have been buttressed by hope that the Federal Reserve will remain accommodative even as the U.S. and the world attempts to stage a recovery from the worst pandemic in a century.

During a CNBC interview on Wednesday Fed Vice Chairman Richard Clarida said that it is still not time to consider pulling back measures put in place by the central bank that have helped to damp the worst of the economic effects from the deadly pathogen. “We’re still a long way from our goals, and in our new framework, we want to see actual progress and not just forecast progress,” Clarida said.

Clarida’s remarks came amid a flurry of similarly dovish comments from Fed members, aiming perhaps to dull the impact of remarks made by Treasury Secretary Janet Yellen that were seen as hawkish on Monday.

“Following Yellen’s comments about raising rates to prevent overheating, a cornucopia of Fed speakers…have swung behind the Fed’s policy stance to keep risk assets well supported,” wrote Neil Wilson, chief market analyst at Markets.com, in a note.

Talk of dialing back accommodative monetary policy in the U.S. come as the Bank of England on Thursday voted 8-1 that the pace of continuing government bond purchases can be “slowed somewhat.”

A strengthening economic backdrop and effective vaccine rollouts in the U.S. have been the main focus for bullish investors.

Equity trading, however, has been unsteady even as corporate results have beaten expectations at a historically strong pace.

In aggregate companies are reporting earnings 22.9% above expectations, which is well above the long-term average going back to 1994 of 3.6% and an average of 15.2% for the prior four quarters, according to data from I/B/E/S data from Refinitiv.

Of the 376 companies in the S&P 500 that have reported earnings to date in the first quarter of 2021, 86.7% reported above analyst expectations, which represents the highest outperformance on record.

Analysts say that investors are still struggling to find reasons to push stocks to further gains, while a fitful rotation has driven investors momentarily out of highflying technology-related stocks and into industrials, banks and energy, which had been the worst performers during the worst of the pandemic but which are expected to perform better as economies reopen. The tech-heavy Nasdaq Composite logged its fourth straight decline on Wednesday, marking its longest losing slide since October.

Notably, a popular exchange-traded fund run by Cathie Wood, ARK Innovation ETF
ARKK,
-4.24%,
is trading 30% below its high struck earlier this year, and off 10% in the year to date after being a 2020 highflier.

Meanwhile, vaccine makers Pfizer
PFE,
-2.25%,
BioNTech
BNTX,
-6.44%
and Moderna
MRNA,
-6.87%
were in focus, following the announcement from U.S. Trade Representative Katherine Tai that the U.S. supports the waiver of intellectual-property protections on COVID-19 vaccines. Shares in Pfizer Inc, Moderna Inc, Johnson & Johnson
JNJ,
-0.10%
and Novavax Inc
NVAX,
-3.32%,
all involved in the making of COVID-19 vaccines, fell Thursday.

Another wave of Fed speakers is on deck for Thursday. Dallas Fed President Rob Kaplan speaks at the Hyman Minsky conference at Bard College at 10 a.m., Boston Fed President Eric Rosengren talks to the Boston College Carroll School of Management at 11 a.m. Cleveland Fed President Loretta Mester will deliver a speech to the University of California at Santa Barbara at 1 p.m.

Which companies are in focus?

• Shares of Regeneron Pharmaceuticals Inc. REGN rose 0.8% in premarket trading Thursday, after the biotechnology company beat first-quarter profit and revenue expectations, with sales of its REGEN-COV antibody cocktail to the SARS-CoV-2 virus also topping forecasts.
• SeaWorld Entertainment Inc. SEAS said Thursday it had net loss of $44.9 million, or 57 cents a share, in the first quarter, narrower than the loss of $56.5 million, or 72 cents a share, posted in the year-earlier quarter.
• Coach parent Tapestry Inc. TPR reported Thursday that it swung to a fiscal third-quarter profit that beat expectations, as Coach and Kate Spade sales rose above forecasts.
• Shares of Norwegian Cruise Line Holdings Ltd. NCLH fell in premarket trading Thursday, after the cruise operator reported a wider-than-expected first-quarter loss and revenue that fell more than forecast, while cash burn was in line with forecasts and said it was preparing to return to service this summer.
• Wayfair Inc. W reported first-quarter net income totaling $18.2 million, or 16 cents per share, after a loss of $285.9 million, or $3.04 per share, last year.
• Cardinal Health Inc. shares CAH slid in premarket trade Thursday, after the drug distributor posted weaker-than-expected earnings for its fiscal third quarter and lowered the top end of its guidance.

How are other assets faring?

• In Europe, the Stoxx Europe 600 SXXP traded 0.4% lower, while London’s FTSE 100 UKX, added 0.1%.
• The 10-year Treasury note yield TMUBMUSD10Y shed about 1 basis point to 1.57.
• The greenback was 0.3% lower at around 90.995, based on the ICE U.S. Dollar Index DXY.
• Gold futures GC00 surged $21.90, or 1.2%, to trade above $1,800 an ounce on Comex. U.S. crude futures CL.1 fell 45 cents, or nearly 0.7%, at $65.14 a barrel on the New York Mercantile Exchange, heading for a third straight gain.
• In Asian trade, Hong Kong’s Hang Seng Index HSI rose 0.8%. China’s Shanghai Composite
  SHCOMP,
  -0.16%
  felll 0.2%, while Japan’s Nikkei 225
  NIK,
  +1.80%
  rose 1.8%.