Yellen says investors should be very careful with some sectors, calls bitcoin ‘highly speculative’
Treasury Secretary Janet Yellen told CNBC on Thursday that there could be parts of the U.S. stock market in which investors should exercise caution.
In an interview that aired on “Closing Bell,” Yellen said she believes higher equity valuations are understandable given the accommodative monetary policy from the Federal Reserve.
“Well, partly we’re in a very low interest rate environment,” Yellen said. “And while valuations are very high, in a world of very low interest rates, price earnings, tight multiples tend to be high. That said there, you know, may be sectors … where we should be very careful,” added Yellen, who took over as Treasury chief in late January under President Joe Biden.
The comments came in response to a question from CNBC’s Sara Eisen, who asked whether Yellen thought it made sense for the major U.S. stock indexes to be trading near record highs during the coronavirus pandemic and its related economic damage. She also asked about big share moves in initial public offerings and SPACs.
Yellen did not specify which sectors she was referring to.
Fox Business/Jonathan Garber
Stock-market investors riding wave of low rates might get blindsided
Exuberant stock-market investors are headed for a rude awakening, according to a growing number of Wall Street strategists.
The S&P 500 has rallied nearly 76% off its March 2020 lows as unprecedented fiscal and monetary stimulus and the Federal Reserve’s promise of low-interest rates for years has given investors the confidence to buy stocks hand over fist.
“Our current caution reflects several factors, including ebullient sentiment readings, stretched valuation levels, and slipping earnings revision momentum,” wrote Citigroup Inc. strategist Tobias Levkovich, who expects the S&P 500 to trade between 3,600 and 4,000.
He added that a “neutral stance is realistic,” but warned stocks could fall up to 20% from current levels while ruling out a decline of 50% or more as the U.S. economy is exiting, not entering, a recession and Fed policy remains accommodative.
Others on Wall Street worry that rising interest rates will derail the stock market’s rally. Some strategists are eyeing the 1.5% level on the 10-year yield, which also corresponds to the S&P 500’s dividend yield.
The 10-year rising above 1.5% would cause the S&P 500 to “adjust downward by 8% or more,” wrote Nomura strategist Masanari Takada. His main scenario, however, is for the benchmark yield to hold in the 1.3% to 1.4% area and having a mild impact on stocks.
Breaching 1.5% on the 10-year would be a “huge overshoot,” said David Rosenberg, chief economist and strategist at Toronto-based Rosenberg Research.
CNN Business/Anneken Tappe
Jobless claims jump: Another 861,000 Americans filed for initial benefits last week
Another 861,000 workers filed for unemployment benefits for the first time last week, according to seasonally adjusted data released Thursday from the Labor Department.
That’s nearly 100,000 more claims than economists had predicted and the highest number in a month. it was also an increase from the week before — which was revised higher as well.
America’s jobs recovery has really lost steam and last week’s initial claims were four times higher than in the same period last year.
The anniversary of the benefit claims spike is only a month away. Last year, initial claims jumped to 3.3 million in the week ended March 21 before peaking at 6.9 million in the following week as the pandemic forced the US economy to shut down.
Nearly a year later, the weekly numbers are much lower again, but haven’t meaningfully improved in months. Weekly claims dropped below a million in August, but their most recent adjusted low was 711,000 — several times higher than the pre-pandemic average.
On top of regular state claims, 516,299 Americans filed for benefits through the Pandemic Unemployment Assistance program, which provides aid for people like the self-employed or gig workers. It was a sharp increase from the prior week. Added up, first-time claims actually stood at 1.4 million last week, not adjusted for seasonal swings.
Continued jobless claims, which count filings for at least two consecutive weeks, stood at 4.5 million in the week ended February 6.
USA Today/Associated Press
Stocks fall as investors fret over jobless claims, inflation
Stocks posted modest losses on Thursday as investors had little reason to buy stocks with discouraging economic data and a steady rise in bond yields, which has start to raise concerns about inflation.
The S&P 500 index dropped 17.36 points, or 0.4%, to 3,913.97. It was the third straight decline for the index. The Dow Jones Industrial Average lost 119.68 points, or 0.4%, closing at 31,493.34 and the technology-heavy Nasdaq Composite fell 100.14 points, or 0.7%, to 13,865.36. The Russell 2000 of small companies fell 1.7%, a significant drop for that index.
Energy prices declined for a second day, as the frigid temperatures that impacted Texas and much of the Midwest moved east. Natural gas prices closed down 4.3%. Energy prices have been volatile the past week as record demand for natural gas and other fossil fuels to warm homes has caused electricity prices to skyrocket. Natural gas is typically used as an “on-demand” fuel source to cover increased electrical needs.’