The S&P 500 Index ($SPX) (SPY) Tuesday closed down -0.72%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -1.00%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.94%. 

Stock indexes Tuesday posted moderate losses, with the S&P 500, Dow Jones Industrials, and Nasdaq 100 falling to 1-1/2 week lows.  Stocks were undercut as the 10-year T-note yield climbed to a 4-month high Tuesday on negative carryover from Monday when the US Mar ISM manufacturing index expanded by the most in 1-1/2 years, dampening the outlook for Fed rate cuts. Stocks maintained moderate losses and bond yields remained higher after Tuesday’s US factory orders and job openings reports were stronger than expected, a hawkish factor for Fed policy.

Stock indexes recovered from their worst levels after two voting Fed members said they favored three rate cuts this year.  San Francisco Fed President Daly said three 25 bp rate cuts in 2024 is a "reasonable baseline" forecast, though there is no urgency to lower rates right now given the economy's strength.  She added if inflation is stickier, the Fed may cut less, and if inflation falls more rapidly, more rate cuts may be warranted.  Also, Cleveland Fed President Mester said she still sees three rate cuts as likely appropriate this year but that "it's a close call" on whether fewer will be needed.

US Feb JOLTS job openings unexpectedly rose +8,000 to 8.756 million, showing a stronger labor market than expectations of a decline to 8.730 million.

US Feb factory orders rose +1.4% m/m, stronger than expectations of +1.0% m/m.

The markets are discounting the chances for a -25 bp rate cut at 7% for the next FOMC meeting on April 30-May 1 and 66% for the following meeting on June 11-12.

Bitcoin (^BTCUSD) fell more than -5% Tuesday to a 1-week low, weighed down by slumping demand for Bitcoin ETFs and stronger-than-expected US economic news that pushed back the outlook for Fed interest rate cuts.  According to Bloomberg data, investors pulled a net $86 million from the batch of 10 spot-Bitcoin ETFs on Monday.

Overseas stock markets Tuesday settled mixed.  The Euro Stoxx 50 fell back from a 23-year high and closed down -0.81%.  China's Shanghai Composite closed down -0.08%.  Japan's Nikkei Stock Index closed up +0.09%.

Interest Rates

June 10-year T-notes (ZNM24) on Tuesday closed down -6.5 ticks.  The 10-year T-note yield rose +5.4 bp to 4.363%.  June T-note prices Tuesday dropped to a 2-week nearest-futures low, and the 10-year T-note yield climbed to a 4-month high of 4.403%.

T-notes were weighed down by Tuesday’s stronger-than-expected US job openings and factory orders reports, which added to Monday’s stronger-than-expected ISM manufacturing report.  Also, an increase in inflation expectations undercut T-note prices as Tuesday's 10-year breakeven inflation rate rose to a 1-1/2 week high of 2.372%.

T-notes recovered from their worst levels after the S&P 500 dropped to a 1-1/2 week low, spurring some safe-haven demand for T-notes. Also, some light short-covering emerged in T-notes after Fed President Daly and Mester said they favored three Fed rate cuts this year.  

European government bond yields Tuesday moved higher.  The 10-year German bund yield rose to a 1-1/2 week high of 2.435% and finished up +10.2 bp at 2.400%.  The 10-year UK gilt yield rose to a 2-week high of 4.105% and finished up +15.2 bp at 4.085%.

 The Eurozone Mar S&P manufacturing PMI was revised upward by +0.4 to 46.1 from the previously reported 45.7.

ECB Feb 1-year inflation expectations eased to 3.1% from 3.3% in Jan, the lowest in 2 years.  Feb 3-year inflation expectations were unchanged at 2.5% from Jan, stronger than expectations of a decline to 2.4%.

German Mar CPI (EU harmonized) rose +0.6% m/m and +2.3% y/y, weaker than expectations of +0.7% m/m and +2.4% y/y.

US Stock Movers

Health insurance stocks were under pressure Tuesday after US regulators didn’t boost payments for private Medicare plans like the industry expected.  As a result, Humana (HUM), the most exposed to Medicare among large insurance companies, closed down more than -13% to lead losers in the S&P 500. Also, CVS Health (CVS) closed down more than -7%, and UnitedHealth Group (UNH) closed down more than -6% to lead losers in the Dow Jones Industrials.  In addition, Centene (CNC) closed down more than -6%, Molina Healthcare (MOH) closed down more than -5%, and Elevance Health (ELV) closed down more than -3%. 

Tesla (TSLA) closed down more than -5% to lead losers in the Nasdaq 100 after reporting Q1 vehicle deliveries of 386,810, well below the consensus of 449,080.

PVH Corp (PVH) closed down more than -22% after forecasting 2025 revenue will fall -6% to -7% compared with a +2% increase last year.  Other apparel retailers weakened on the news with VF Corp (VFC) closing down more than -5%, and Ralph Lauren (RL) and Tapestry (TPR) closing down more than -4%. 

Verve Therapeutics (VERV) closed down more than -36% after it cited safety concerns for pausing enrollment in a study of its gene-editing treatment for people with high cholesterol. 

Autodesk (ADSK) closed down more than -3% after it filed to delay its 10-K annual report, citing an internal investigation on the company’s free cash flow and adjusted operating margin practices.

Homebuilding stocks moved lower Tuesday after the 10-year T-note yield rose to a 4-month high, a bearish factor for housing demand.  As a result, Lennar (LEN), PulteGroup (PHM), DR Horton (DHI), and Toll Brothers (TOL) closed down more than -3%. 

Cruise line operators and airline stocks retreated after WTI crude oil climbed to a 5-1/4 month high, potentially boosting fuel costs that reduce profits.  Norwegian Cruise Line Holdings (NCLH) closed down more than -8% and American Airlines Group (AAL) closed down more than -6%.  Also, Carnival (CCL) closed down more than -4% and United Airlines Holdings (UAL) closed down more than -3%. 

Biomea Fusion (BMEA) closed down more than -16% after JPMorgan Chase downgraded the stock to neutral from overweight, citing preliminary data from a diabetes trial.

Energy stocks and energy service providers rallied Tuesday with the price of WTI crude oil up more than +1% at a 5-1/4 month high.  As a result, Phillips 66 (PSX) closed up more than +3% to lead gainers in the S&P 500.  Also, Marathon Petroleum (MPC) closed up mor than +3% and Valero Energy (VLO) closed up more than +2%.  In addition, Exxon Mobil (XOM), ConocoPhillips (COP), and Occidental Petroleum (OXY) closed up more than +1%. 

Roivant Sciences Ltd (ROIV) closed up more than +4% after its board authorized a share repurchase program for up to $1.5 billion.

McCormick & Co (MKC) closed up more than +2% after Argus Research upgraded the stock to buy from hold with a price target of $88. 

Mining stocks rise Tuesday after gold prices climbed to a record high and copper and silver prices posted 1-1/2 week highs.  As a result, Freeport McMoRan (FCX) closed up more than +2%, Newmont (NEM) close up nearly +1%, and Southern Copper (SCCO) closed up +0.64%.

Molson Coors Beverage (TAP) closed up more than +1% after Evercore ISI said recent industry data shows the company’s beverage brands are outperforming Anheuser-Busch’s brands.

Walt Disney (DIS) closed up more than +% after the Wall Street Journal reported the company is leading in its proxy fight against activist Peltz with more than half of the votes counted.

Earnings Reports (4/3/2024)

Acuity Brands Inc (AYI), Novagold Resources Inc (NG), Resources Connection Inc (RGP), Simulations Plus Inc (SLP), Sportsman's Warehouse Holdings (SPWH), SWK Holdings Corp (SWKH).

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