April 8, 2024 – 7:17 AM PDT
(Reuters) – The benchmark S&P 500 and the Nasdaq struggled for direction in early trading on Monday after Treasury yields gained on rising bets that the U.S. Federal Reserve could delay interest-rate cuts this year.
Hawkish commentary from central bank officials last week and stronger-than-expected manufacturing and jobs reports pointed to a resilient U.S. economy, easing the pressure on the Fed to cut interest rates quickly.
U.S. stocks recorded weekly losses on Friday as traders scaled back expectations on the timing of rate cuts. They now see an around 51% chance of the Fed announcing its first rate cut in June, according to the CME FedWatch Tool, down from about 58% at the beginning of last week.
The market has also pared back expectations of more than three rate cuts this year, from between three and four a few weeks ago, according to LSEG data.
“A lot of people are trying to be overly optimistic with a Fed rate cut. It kind of doesn’t make sense,” said Michael Matousek, head trader at U.S. Global Investors Inc.
“We’ve seen economic numbers over the past few weeks. It’s not hot but it’s still running strong. So why would you really want to cut rates?”
The yield on 10-year Treasury notes rose to its highest level since last November earlier in the session, pressuring equities, and was last at 4.417%.
Market focus now shifts to the March reading of the U.S. Consumer Price Index (CPI), due later in the week, that is expected to show a rise in headline inflation to 3.4% year-on-year, from 3.2% in February.
Also on the radar is the release of minutes from the Fed’s latest meeting, where it stuck to its guidance of three rate cuts in 2024.
Investors await commentary from Chicago Fed President Austan Goolsbee and his Minneapolis counterpart Neel Kashkari later in the day for policy cues.
Meanwhile, Wells Fargo raised its year-end target for the benchmark S&P 500 (.SPX), opens new tab index to 5,535 – the highest among Wall Street brokerages – from its previous forecast of 4,625.
Cushioning some losses, Tesla (TSLA.O), opens new tab rose 4.6% after CEO Elon Musk said the company would unveil the Robotaxi on Aug. 8.
At 9:49 a.m. ET, the Dow Jones Industrial Average (.DJI), opens new tab was up 72.78 points, or 0.19%, at 38,976.82, the S&P 500 (.SPX), opens new tab was up 0.83 points, or 0.02%, at 5,205.17, and the Nasdaq Composite (.IXIC), opens new tab was up 14.24 points, or 0.09%, at 16,262.76.
Eight of the 11 S&P 500 sectors advanced, with consumer discretionary (.SPLRCD), opens new tab leading gains, while information technology (.SPLRCT), opens new tab led declines.
Cryptocurrency-related stocks advanced, tracking rising bitcoin prices. Exchange operator Coinbase Global (COIN.O), opens new tab, crypto miner Marathon Digital (MARA.O), opens new tab and software firm MicroStrategy (MSTR.O), opens new tab added between 8.2% and 11.2%.
Advancing issues outnumbered decliners by a 2.60-to-1 ratio on the NYSE and by a 1.74-to-1 ratio on the Nasdaq.
The S&P index recorded 15 new 52-week highs and one new low, while the Nasdaq recorded 46 new highs and 33 new lows.
Reporting by Shashwat Chauhan and Shristi Achar A in Bengaluru; Editing by Anil D’Silva and Pooja Desai