US Stock Market Declines as Rate Cut Expectations Diminish – Nasdaq 100, Dow Jones, S&P 500 Update

US Stock Market Declines as Rate Cut Expectations Diminish – Nasdaq 100, Dow Jones, S&P 500 Update

Impact of Economic Data

Influential technology stocks like Nvidia, Microsoft, and Amazon each saw declines exceeding 1%, correlating with a notable increase in the U.S. Treasury 10-year yield, which reached its highest point since late November. This response followed the release of U.S. economic data for February, which highlighted stronger-than-expected factory orders and job openings, signaling robust economic health.

Manufacturing Data and Rate Cut Doubts

Both the Dow and S&P 500 closed lower on Monday, responding to unexpectedly strong manufacturing data from the Institute for Supply Management (ISM). This data raised doubts about the Federal Reserve’s earlier projection of three interest rate cuts, a key factor in recent market movements.

Market Strategists Weigh In

David Russell, global head of market strategy at TradeStation, commented on the market’s reaction to the ISM data and the anticipation of Friday’s employment report, highlighting concerns about the likelihood of multiple rate cuts this year.

Fed Decisions and Market Expectations

Market participants are currently assigning a nearly 57% probability to a Fed interest rate cut of at least 25 basis points in June, with expectations for additional cuts in 2024. However, recent strong economic indicators are causing a reevaluation of these expectations.

Volatility and Upcoming Fed Remarks

The CBOE Volatility Index, a measure of market uncertainty, reached a two-week high, underscoring investor anxiety. Upcoming comments from various Federal Reserve officials, including New York Fed President John Williams and others, are eagerly awaited for further guidance.

Quarterly Contrast and Sector-Specific Movements

This cautious market tone contrasts sharply with the S&P 500’s strong performance in the first quarter, the best in five years, driven by AI optimism and hopes for relaxed monetary policy. Specific sectors like healthcare insurance saw significant declines, with companies like UnitedHealth, CVS Health, and Humana affected by unchanged Medicare reimbursement rates. Additionally, Tesla’s stock fell after underwhelming quarterly deliveries, and Calvin Klein-parent PVH Corp forecasted a notable drop in revenue.

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