US Yields Spike as S&P 500 Trims Gains by Half: Markets Wrap – Yahoo Finance

(Bloomberg) — U.S. Treasuries were sold Monday as strong retail sales strengthened the view that the Federal Reserve is in no hurry to cut interest rates, and traders braced for a wave of bank bond sales.

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The yield on the benchmark 10-year Treasury note hit a new 2024 high, weighing on the interest rate-sensitive tech industry. The S&P 500 has pared back most of its gains, which were approaching 1% in early trading. West Texas Intermediate crude oil traded below $85 per barrel after Axios reported that Israeli Defense Minister Yoav Gallant said Israel had no choice but to retaliate against Iran. Reduced some losses.

Read: Israeli stocks reverse previous gains and end 1.2% lower

“Geopolitical tensions in the Middle East remain a wild card,” said Chris Larkin of Morgan Stanley’s E*Trade. “Investors will need to allay concerns that weaker inflation will delay rate cuts,” he said.

The S&P 500 index is hovering around 5,140. Speculation that Salesforce is in talks to buy Informatica led tech stocks to fall. Bank stocks outperformed after a surprise profit from Goldman Sachs Group Inc. The yield on the 10-year Treasury note rose 12 basis points to 4.64%, while the yield on the two-year note rose 12 basis points. It was very close to 5% early Monday.

Thorsten Slok of Apollo Global Management said strong tailwinds from accommodative financial conditions continued to lift inflation and growth, including consumer spending in March.

“Given the continued reacceleration of the economy, the Fed will not cut rates in 2024,” he said.

Monetary policy expectations have shifted toward a delay in the Fed’s start to cut rates, with officials saying they need greater confidence that inflation is on a sustainable path toward the 2% goal. Says. Traders are no longer fully pricing in rate cuts before November.

“Our view is that the Fed’s interest rate system is not about “longer-term increases,” but rather “an immediate pause until inflation loses its tenacity.” ‘This is a continuation of ‘.

According to Chris Zaccarelli of the Independent Advisor Alliance, one constant throughout this expansion has been the strength of the consumer, and based on the latest retail sales figures, that strength only seems to be growing.

“The market has been supported by the magic of strong corporate earnings and lower interest rates, but the two look increasingly at odds, so there will be some caution in the near term,” he said. .

CFRA’s Sam Stovall said investors are now worried that these tough inflation measures will be seen as a catalyst for a correction, as concerns grow that the Fed will “slow down” in lowering interest rates. He said there was.

He added that in all 24 corrections since World War II, it took the S&P 500 just four months to recover everything lost in the decline. Even better, since 1990, the market has returned to break-even in just three months.

“So history is yet another reminder that for long-term investors, buying is usually better than bailing,” Stovall said.

Stubborn inflation, a strong economy and signals from Fed officials that interest rates will remain high for a long time derailed traders’ optimism for rate cuts by the summer. But that doesn’t mean they’re worried about the stock market.

Fortune tellers at Jefferies LLC, JPMorgan Chase & Co., Citigroup and State Street say strong economic data and corporate earnings will continue this year’s stock market rally, regardless of whether interest rates are cut. There is a consensus that this is sufficient.

Robust inflation driven by strong economic momentum is better for U.S. stocks than stagflation, according to Bank of America strategists led by Ohsung Kwon.

“Even if inflation is stagnant due to economic momentum, that is not necessarily bad for stock prices,” they added, “but stagflation is bad.”

“Recent inflation data has challenged the notion of a Goldilocks U.S. economy. Instead, investors and the Fed may have to endure an even steeper inflation path than they had anticipated at the beginning of the year,” UBS Global said.・Wealth Management’s Jason Draho said. “However, the overall macro picture of trend-level growth, gradual and undulating disinflation, and the Fed poised to exercise its rate-cutting authority remains supportive of risk assets.”

JPMorgan Chase & Co. strategists led by Mislav Matejka say much of the optimism after this year’s record rally is already priced in, with stocks rising on expectations for a strong earnings season. I wrote that I don’t want you to have high expectations.

“Stock markets have already priced in earnings well, suggesting investors are more optimistic than the pessimistic earnings forecasts of sell-side analysts,” they said. “We need clear earnings acceleration to justify the current stock valuation, and we fear that will not materialize.”

Strategists at BlackRock’s Investment Research Institute believe signs of profit growth this quarter will extend beyond big U.S. technology companies to other sectors such as industrials and materials.

Strong economic data and corporate earnings have supported risk appetite so far this year despite a spike in bond yields, but “returns need to meet high expectations,” said global chief investment strategist Wei. Lee and his team said in their weekly commentary note on Monday.

Wells Fargo Investment Institute has raised its outlook for the U.S. stock market and corporate earnings outlook as the outlook for the U.S. economy improves and financial market conditions continue to be accommodative.

The investment adviser raised its forecast for the S&P 500 index by the end of 2024 to a range of 5,100-5,300.

“It is important to emphasize that these year-end targets take into account the potential for market disappointment related to the trajectory of inflation and the federal funds rate,” WII strategists said.

Citigroup strategists, including Dirk Wheeler, say the market will return to trading the Fed unless oil prices spike due to tensions in the Middle East, in which case they recommend investors buy the dip. .

Despite heightened medium-term risks, this weekend’s attack on Iran is currently unlikely to lead to further escalation.

“This war could move down the escalation ladder if the Israeli government follows the White House’s recommendations and abandons retaliatory measures,” RBC Capital Markets analysts including Helima Croft said in a note. . Iran’s action was “much larger than previous retaliations, but it was still telegraphed in advance.”

Company highlights:

  • M&T Bank’s stock rose by the most in two years after the bank raised its 2024 outlook for net interest income, its main source of income.

  • As Tesla grapples with a slowdown in demand for electric vehicles, Elon Musk wrote in an email to employees that the company plans to cut its global workforce by more than 10%.

  • American Airlines Group’s pilots union has warned its members to be vigilant due to a “significant uptick” in safety and maintenance-related issues at the airline.

  • Clearlake Capital Group LP has made a sweet bid of $80 a share to acquire Blackbaud Inc., about a year after its previous approach was rejected by the cloud software provider.

  • Charles Schwab’s first-quarter net revenue beat expectations as the retail brokerage looks to weather the turmoil of 2023.

  • Apple’s iPhone shipments were nearly 10% lower than expected in the quarter ending in March, reflecting sluggish sales in China, even as the overall smartphone industry is recovering.

  • CVC Capital Partners has revived plans for an initial public offering in Amsterdam, raising at least 1.25 billion euros ($1.3 billion) with investors in a listing that could pave the way for other private equity firms to go public. ) are trying to procure.

  • Lufthansa has cut its full-year profit forecast, expecting adjusted operating profit to fall as the German airline group absorbs the financial hit from a prolonged strike in recent months.

This week’s main events:

  • China real estate prices, retail sales, industrial production, GDP, Tuesday

  • German ZEW survey forecast, Tuesday

  • US housing starts, industrial production, Tuesday

  • Tuesday’s results for Morgan Stanley and Bank of America.

  • Fed Vice Chairman Philip Jefferson speaks on Tuesday

  • BOE Governor Andrew Bailey speaks on Tuesday

  • IMF releases latest global economic outlook on Tuesday

  • Eurozone CPI, Wednesday

  • Fed issues beige book on Wednesday

  • Cleveland Fed President Loretta Mester speaks Wednesday

  • Federal Reserve President Michelle Bowman speaks on Wednesday

  • BOE Governor Andrew Bailey speaks on Wednesday

  • Taiwan Semiconductor’s financial results, Thursday

  • US conference board leading index, number of existing homes sold, number of new unemployment insurance claims, Thursday

  • Fed Director Michelle Bowman speaks Thursday

  • New York Fed President John Williams speaks Thursday

  • Atlanta Fed President Rafael Bostic speaks Thursday

  • BOE Deputy Governor Dave Lumsden and ECB Board Member Joachim Nagel speak on Friday

  • Chicago Fed President Austan Goolsby speaks on Friday

The main movements in the market are:


  • As of 11:59 a.m. New York time, the S&P 500 was up 0.3%.

  • Nasdaq 100 rose 0.2%

  • The Dow Jones Industrial Average rose 0.4%.

  • Stoxx Europe 600 has little change

  • MSCI World Index little changed


  • Bloomberg Dollar Spot Index little changed

  • The euro was unchanged at $1.0643.

  • The British pound was almost unchanged at $1.2464.

  • The Japanese yen fell 0.7% to 154.27 yen to the dollar.


  • Bitcoin rose 1.1% to $64,566.04

  • Ether rose 3.1% to $3,163.71.


  • The 10-year Treasury yield rose 12 basis points to 4.64%.

  • Germany’s 10-year bond yield rose 8 basis points to 2.44%.

  • The UK 10-year bond yield rose 10 basis points to 4.24%.


  • West Texas Intermediate crude oil fell 1.4% to $84.45 a barrel.

  • Spot gold rose 0.3% to $2,351.66 an ounce.

This article was produced in partnership with Bloomberg Automation.

–With assistance from Alexandra Semenova, Sagarika Jaisinghani, Yongchang Chin, Alex Longley, Julia Fanzeres, Felice Maranz, and Ye Xie.

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