CNBC Daily Open: U.S. stocks drop and Treasury yields widen their inversion as the economy gives conflicting signals

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February 10, 2023
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Traders work on the floor of the New York Stock Exchange (NYSE) on June 27, 2022 in New York City.

Spencer Platt | Getty Images

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

The January rally in U.S. stocks fizzled as Treasury yields widened their inversion. Recent data failed to paint a coherent picture of the economy.

What you need to know today

U.S. stocks closed lower Thursday, giving up a midday rally. The Nasdaq saw the biggest loss of the major indexes, dropping 1.02%. Asia-Pacific shares largely fell on Friday. The Shanghai Composite shed 0.46% even though China’s consumer prices in January rose less than estimated.

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 been hit recently by slowing revenue growth and criticism that it paid too much for targets such as Slack.

The bottom line

The January rally seems to be fizzling as investors process the strange state of the U.S. economy.

Weekly jobless claims in the U.S. hit 196,000 for the week ending Feb. 4. Though it’s an increase of 13,000 from the prior week, it’s still one of the lowest numbers historically. Yet the number is more than what analysts expected and runs contrary to January’s jobs data, which reported record low unemployment.

Despite a strong labor market, the Treasury yield curve remains inverted — meaning the yield on the 2-year Treasury exceeds that of the 10-year Treasury. On Thursday, the inversion widened. That usually indicates investors are worried about market conditions in the near term, and it sometimes signals a recession.

Those economic signals, in combination with the Federal Reserve’s continuing, hawkish tones, seemed to give investors pause. On Thursday, U.S. stocks continued their two-day losing streak. 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% slide in Google-parent Alphabet and a 3% decline in Meta, dropped 1.02%.

Until economic data paints a more coherent picture of the U.S. economy, it’s likely that markets stay choppy.