Stocks Kick off the Quarter with a Sluggish Start: Anxieties Mount for Fed and Investors. Plus, Brace Yourself with 5 Key Insights Ahead of Market Opening.

Stocks Kick off the Quarter with a Sluggish Start: Anxieties Mount for Fed and Investors. Plus, Brace Yourself with 5 Key Insights Ahead of Market Opening.

Nothing can stop the stock market rally, right? Well, investors were given an unwelcome reminder of something that can puncture the positivity—rising bond yields.

The second quarter began with losses for the Dow Jones Industrial Average and S&P 500 indexes as Treasury yields jumped Monday. That’s not the end of the world—the S&P 500 began the year with a three-day losing streak and still went on to rise more than 10% in the first quarter.

But the reasons behind the quarter’s sluggish start may be cause for concern. Federal Reserve Chairman Jerome Powell said Friday that the central bank doesn’t need to be in a hurry to cut interest rates. The message seemed to hit home for markets, helped along by strong manufacturing data Monday.

Bond yields rose and the probability of a rate cut in June fell to 58%, down from 73% a month ago, according to CME’s FedWatch tool. To be sure, yields have risen this year and rate expectations have also been pushed back. But neither of those things has significantly impacted stocks, which have surged to record highs.

However, the start to April trading suggests rate expectations and the bond market could have a more significant role to play.

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Another factor for investors to watch is the performance of the so-called Magnificent 7 stocks.

Tesla
,

which reports crucial delivery numbers Tuesday, and

Apple

have lagged behind the broader market in 2024 and more recently the rest of the group, including

Nvidia
,

has underperformed.

On the one hand that indicates broader market strength, on the other it suggests the heavily weighted group may not be able to drag stocks higher in times of need.

Of course, it could just be a blip and economic strength may support another strong earnings season and a further leg higher for the rally. But investors should be increasingly wary of the bond market in the months ahead.

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—Callum Keown

***

Disney Is Winning the Proxy Fight Against Nelson Peltz

Nelson Peltz, the activist investor trying to force through changes at Walt Disney, is losing the battle against CEO Bob Iger. The argument is over how much money Disney should be making with its wealth of intellectual property and theme parks.

  • Peltz’s Trian Partners says the company needs to unlock more free cash flow and has nominated two candidates for seats on Disney’s board, which is currently being voted on by shareholders. Iger, who returned to the company in 2022 after it ran into trouble, says it’s already back on track.
  • With more than half the votes counted, Disney’s preferred candidates are winning, The Wall Street Journal reported, citing people familiar with the matter. BlackRock, Disney’s second-biggest shareholder, is backing Iger, the Journal purported. The world’s biggest money manager owns more than 4% of the company, worth more than $9 billion. Mutual fund firm, T. Rowe Price, which owns around 0.5%, said Monday it also supports Disney.
  • Trian, which has a 1.8% stake in Disney, has some big-name backers, among the tech giant’s shareholders, as well. They include Neuberger Berman and the California Public Employees’ Retirement System, the biggest U.S. pension fund.

What’s Next: Analysts are bullish on the stock.

UBS
’s

John Hodulik last week raised earnings estimates, adding that a management change is a downside risk.

Barclays

strategist Kannan Venkateshwar moved Disney to an Overweight rating from Equal Weight.

—Brian Swint

***

Trump’s Net Worth Falls $1 Billion as Media Stock Tanks

Former President, and now presidential candidate, Donald J. Trump saw his paper net worth drop by $1 billion as shares of his

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Trump Media & Technology Group

sank lower for a second straight day. The parent company of Truth Social disclosed it lost more than $58 million last year on declining revenue.

  • The company generated $4.1 million in revenue in 2023, with less than $1 million of that coming in the fourth quarter. It hasn’t disclosed active user numbers, other than the nine million sign-ups across its platforms. That is below newly publicly traded Reddit and other social-media platforms.
  • The stock fell nearly 22% on Monday but is up 32% since the media company merged with a blank-check company last week. Trump Media shares are up 178% so far this year. It has a market value of $6.6 billion, and Trump owns a 57% stake.
  • The loss shouldn’t keep Donald Trump from getting 36 million additional shares of Trump Media that could vest this month under the terms of an agreement with the company. Trump’s existing stake is 78.75 million shares of the company.
  • Although investors may be tempted to short the stock, borrowing it to put on that trade is both difficult and expensive. About 22% of the stock is held by public shareholders, many of them Trump supporters. Interactive Brokers’ stock loan desk was quoting a borrow rate of 800%.

What’s Next: S3 Partners managing director Ihor Dusaniwsky said shorts have lost nearly $183 million betting against Trump Media and its predecessor company, Digital World Acquisition Corp., this year. The stock would need to fall below $25 for shorts to break even. It closed Monday at $48.66.

—Paul R. La Monica, Andrew Bary, and Janet H. Cho

***

Google Will Delete Browsing History of Millions of Search Users

Alphabet

-owned Google has agreed to destroy the web-browsing histories of millions of its search users, including Chrome users who visited websites using the “Incognito” status. The move is part of a settlement over inadequate disclosures about its data collection activities.

  • The details of the previously announced settlement were laid out in a federal court filing. Google will destroy billions of data points it has collected, update its disclosures about tracking data within the private search mode, and allow Incognito users to opt out of third-party data trackers called cookies for five years.
  • The settlement “ensures real accountability and transparency from the world’s largest data collector” and helps uphold users’ right to internet privacy, the lawsuit said. David Boies, who represented consumers, called the amount and scope of data that Google will delete “unprecedented.”
  • From the more than 900,000 internal documents, plaintiffs found Google’s employees calling Incognito “effectively a lie” and raising ethics and honesty questions. Chief Marketing Officer Lorraine Twohill warned CEO Sundar Pichai that Incognito browsing shouldn’t be called private.
  • Google could not be reached for comment. Google spokesman José Castañeda told The Wall Street Journal the data were never linked with individuals or used for any form of personalization, and called the individual lawsuits meritless.

What’s Next: The settlement still must be approved by a federal judge. Affected users can file lawsuits against Google for financial damages. One lawsuit on behalf of 50 people has already been filed in a California state court, and lawyers said they plan to file more.

—Janet H. Cho

***

Officials Disclose Human Bird Flu Case After Cow Exposure

A person in Texas who had contact with dairy cows that were presumed to be infected with bird flu has tested positive for the illness, state health officials and the Centers for Disease Control and Prevention said. It is the second-known U.S. case of a person with bird flu.

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  • The virus has been widespread among wild birds for several years. Infections ravaged the American poultry industry in 2022. Last week, health officials said the virus had been detected in cows in Texas, Kansas, and Michigan, with suspected cases in New Mexico and Idaho.
  • Officials believe the cows caught it from wild birds, but couldn’t rule out transmission among the cattle. Now, the disease appears to have moved from cattle to a human. Texas health officials said the patient presented with conjunctivitis and was tested late last week. The CDC did more tests.
  • The unidentified person is being treated with oseltamivir, the antiviral drug sold by

    Roche

    as Tamiflu. The CDC said the only previous U.S. case of bird flu in a human was in 2022 in Colorado. It also said it considers the risk of transmission to the general public to be low.

  • The Department of Agriculture said initial tests of the virus found in the cattle hadn’t found mutations that would make it more transmissible to humans. The Department told Barron’s milk from sick cows is being destroyed and there’s no concern about the commercial milk supply, which is pasteurized.

What’s Next: The Food and Drug Administration said it isn’t known if the virus can be transmitted through unpasteurized, or raw, milk and products made with it. While raw milk cannot be transported across state lines for sale, some individual states do allow the sale of raw milk.

—Josh Nathan-Kazis and Janet H. Cho

***

Gold Surges to Another Record as Bullion Beats out S&P 500

Gold advanced further into record territory, with the end of March topping the best two-quarter stretch for the yellow metal in eight years. Gold’s price is boosted by expectations the Federal Reserve will start cutting interest rates as early as June, burnishing bullion’s attraction as an investment.

  • Gold traded as high as $2,264. Its price rose 8% in the first quarter, the 12th biggest gain among commodities tracked by Dow Jones Market Data. The front-month price has risen for five straight sessions. Gold has also outshone the S&P 500 since the Fed started raising rates.
  • Since early 2022, Gold is up 20% compared with a 14% rise in the


    S&P 500

    over the same period. Purchases from central banks diversifying their reserves and persistent retail demand from Chinese investors looking for a hedge are also supporting its rally, XM analyst Marios Hadjikyriacos said.

  • Elsewhere, Cocoa was the best performing commodity in the first quarter, up 141.18%, according to Dow Jones Market Data, reaching 17 record settlement prices during the three months. Cocoa reached an 18th record settlement price on Monday.
  • Separately, prices for lean hogs rose the second-highest in the first quarter, up 52%. Among other top moves in commodities, rubber prices rose nearly 35%, orange juice prices rose 19%, and sugar prices rose 10%, according to Dow Jones Market Data.

What’s Next: Economic data this week could further shift rate-cut expectations, gold prices, and bond yields. The big one comes Friday, when the March jobs report is released. Investors want to see signs of a resilient economy that isn’t running so hot it could keep the Fed from cutting rates.

—Liz Moyer and Jack Denton

***

Be sure to join this month’s Barron’s Daily virtual stock exchange challenge and show us your stuff.

Each month, we’ll start a new challenge and invite newsletter readers—you!—to build a portfolio using virtual money and compete against the Barron’s and MarketWatch community.

Everyone will start with the same amount and can trade as often or as little as they choose. We’ll track the leaders and at the end of the challenge the winner whose portfolio has the most value will be announced in The Barron’s Daily newsletter.

Are you ready to compete? Join the challenge and pick your stocks here.

***

—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner

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