US Market tumbles on inflation fears

The US stocks suffered heavy losses on Thursday, 25 February 2021, dragging the broader Nasdaq, the S&P 500 and the Dow indexes all deep into the sea of red territory, as a continued increase in treasury yields, which led to renewed concerns about interest rates and related inflation.

At the close of trade, the Dow Jones Industrial Average index declined 559.85 points, or 1.75%, to 31,402.01. The S&P500 index dropped 96.09 points, or 2.45%, to 3,829.34. The tech-heavy Nasdaq Composite Index sank 478.54 points, or 3.52%, to 13,119.43.

US Treasury yields vaulted to their highest since the pandemic began on expectations of a strong economic expansion and related inflation. Yields took off with startling speed on Thursday, with the rate on 10-year Treasuries at one point reaching 1.61%, the highest in a year. In a telltale warning sign for some strategists, the 5-year Treasury yield soared convincingly above 0.75%, a crucial level that was expected to exacerbate selling, as traders pulled forward bets on when the Federal Reserve will start lifting policy rates. The 10-year U.S. real yield -- which strips out inflation and is seen as a pure read on growth prospects -- climbed as much as 25 basis points to a level last seen in June.

The increase in yields came following the release of a batch of largely upbeat U.S. economic data, including a report from the Labor Department showing a steep drop in first-time claims for U.S. unemployment benefits in the week ended February 20th. The Labor Department said initial jobless claims tumbled to 730,000, a decrease of 111,000 from the previous week's revised level of 841,000.

The Commerce Department also released a report showing new orders for U.S. manufactured durable goods spiked by much more than expected in the month of January. The report said durable goods orders soared by 3.4% in January after jumping by an upwardly revised 1.2% in December.

A separate report released by the Commerce Department showed U.S. gross domestic product jumped by slightly more than originally estimated in the fourth quarter of 2020. The Commerce Department said GDP surged up by 4.1% in the fourth quarter compared to the previously reported 4% spike.

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