The US economic system is giving conflicting alerts

Traders work on the floor of the New York Stock Exchange (NYSE) on July 25, 2022 in New York City.

Spencer Platt | News from Getty Images | Getty Images

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US stocks fall as Treasury yields extend their inversion. The US economy is giving conflicting signals.

What you need to know today

• US stocks closed lower on Thursday, giving up a midday rally. The Nasdaq posted the biggest loss of the major indexes, falling 1.02%. Asia-Pacific fell broadly on Wednesday, although Chinese markets outperformed and rose.

• Speaking of activists, Dan Loeb’s hedge fund Third Point is the latest activist investor to take a stake in Salesforce, CNBC confirmed. It joins ValueAct Capital, Elliott Management and Starboard Value. Salesforce has recently been hit by slowing revenue growth and criticism that it overpaid for targets like Slack.

The final result

January’s rally appears to be faltering as investors process the US economy’s strange state.

Weekly jobless claims in the US hit 196k for the week ended February 4th. Although this is an increase of 13,000 from the previous week, it is still one of the lowest numbers in history. However, the number is higher than analysts had expected and is at odds with January jobs data, which reported record-low unemployment.

Despite a strong labor market, the government bond yield curve remains inverted – meaning that the 2-year government bond yield exceeds that of the 10-year government bond. The inversion widened on Thursday. This usually indicates that investors are concerned about market conditions in the near term, and sometimes it indicates a recession.

These economic signals, combined with the US Federal Reserve’s continued hawkish tone, seemed to pause investors. On Thursday, US stocks continued their two-day dry spell. The Dow Jones Industrial Average lost 0.73% and the S&P 500 fell 0.9%. The tech-heavy Nasdaq Composite, weighed down by a 4% decline in Google parent Alphabet and a 3% decline in Meta, fell 1.02%.

Until economic data paints a more coherent picture of the US economy, markets are likely to remain unsettled.

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