Stock Market Slumps: Dow Futures Dive by over 250 Points as Yields Rally to Highest Levels Since 2024

Stock Market Slumps: Dow Futures Dive by over 250 Points as Yields Rally to Highest Levels Since 2024

US stocks were poised for losses on Tuesday, signaling another day in the doldrums as healthcare insurers tumbled and investors faced up the chances an interest rate cut will come later than hoped.

Futures on the Dow Jones Industrial Average (^DJI) slipped 0.6%, or over 250 points, setting the blue-chip index back from a bid to reach the key 40,000 level. S&P 500 (^GSPC) futures shed 0.4%, while contracts on the tech-heavy Nasdaq 100 (^NDX) fell 0.5%.

US bonds continued to struggle, as the yield on the benchmark 10-year Treasury (^TNX) rose to around 4.38%, hovering at its highest levels of 2024.

Stocks have made a lackluster start to the second quarter after racking up a string of records in the first months of 2024. Hotter-than-expected manufacturing readings have given weight to growing doubts the Federal Reserve will cut rates in the first half of the year as the US economy shows surprising resilience.

An update on job openings data later Tuesday should provide food for thought in the countdown to Friday’s jobs report, a key input in the Fed’s decision making. The market will also listen out for commentary from Fed officials Michelle Bowman, Loretta Mester, and Mary Daly for clues to whether its inflation problem could derail the three rate cuts planned.

A pullback in health insurer stocks dragged on the markets early on Tuesday, after US regulators surprised the industry by failing to boost payments for private Medicare plans as usual. Humana (HUM) shares fell about 9%, while CVS (CVS) shed almost 6%.

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  • Consumer stocks in focus with gas prices on the rise

    Stocks levered to the spending of consumers could become ice cold this spring.

    Oil prices hit $85 a barrel this morning, a five-month high. The advance in oil — which may be starting to weigh on the broader market — has lit a fire under nationwide gas prices. The national average for gas prices of $3.51 a gallon last week was unchanged week on week — that after prices rose for four straight weeks.

    Even still, gas prices were up 16 cents from a month ago.

    “While we seem to be nearing a short-term peak, one word of caution for those in the Mid-Atlantic and Northeast: you haven’t yet finished the transition to summer gasoline, so you may experience some sticker shock in a few weeks. Be prepared for somewhat of a punch. For the rest of the nation, so long as we don’t see extenuating circumstances, we’re likely close to a top in prices. Let’s hope it pans out and sticks!” said Patrick De Haan, head of petroleum analysis at GasBuddy in a new blog post.

    As gas prices have risen, the Consumer Discretionary Select Sector SPDR Fund (XLY) has dropped 1.4% the past month – perhaps on fears of consumer spending. Key discretionary retailers in the fund such as Amazon (AMZN), Starbucks (SBUX) and Nike (NKE) have relatively under-performed the S&P 500 in the last month.

    Interestingly, Walmart’s (WMT) stock is up 2% in the past month as investors view the retailer as a trade down play on higher gas prices.

  • Stock Market Slumps: Dow Futures Dive by over 250 Points as Yields Rally to Highest Levels Since 2024

    Health insurer stocks tank

    Health insurer stocks are being sent to their sickbeds on Tuesday.

    Humana (HUM) is getting drilled by 9% pre-market, with pressure also being seen on UnitedHealth Group (UNH) and Cigna (CI). The sell-offs come as US regulators failed to increase payments for Medicare Advantage plans in line with Wall Street estimates.

    Payments will rise by 3.7% on average in 2025, down about 0.2% year-over-year.

    Long-time healthcare analyst Lisa Gill at JP Morgan said in a client note that came as a “surprise”, as many on the Street expected an increase “given the utilization environment.”

    Humana is seen as the most exposed to the decision from the Centers for Medicare and Medicaid Services.

    Key call-out from Humana’s latest annual report:

    “At December 31, 2023, we provided health insurance coverage under CMS contracts to approximately 5,408,900 individual Medicare Advantage members, including approximately 851,300 members in Florida. These Florida contracts accounted for premiums revenue of approximately $14.9 billion, which represented approximately 19% of our individual Medicare Advantage premiums revenue, or 14% of our consolidated premiums and services revenue for the year ended December 31, 2023.”

    RBC analyst Ben Hendrix said in a note this morning Humana’s profit guidance will have to be reset in the wake of the decision and the stock could stay under pressure. Conversely, Hendrix is recommending to clients to buy Cigna shares on the pullback.

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