What you need to know…

The S&P 500 Index ($SPX) (SPY) Monday closed up +0.37%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.98%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.25%.

Stock indexes Monday settled mixed, with the S&P 500 and Dow Jones Industrials posting 6-week highs.  A more than -6% fall in Tesla Monday weighed on technology stocks and kept the Nasdaq 100 in negative territory.

The broader market Monday moved higher after a gauge of U.S. manufacturing activity contracted by more than expected, which knocked bond yields lower and tempered inflation concerns caused by the surprise cut in oil production by OPEC+.

Strength in energy stocks Monday was a bullish factor for the overall market, with May WTI crude oil up more than +6% at a 2-1/4 month high after OPEC+ on Sunday announced a surprise oil production cut of more than 1 million bpd starting May 1.  Saudi Arabia said the cuts were a "precautionary measure aimed at supporting the stability of the oil market."

Morgan Stanley warns that this year's rally in technology stocks isn't sustainable and that the sector will return to new lows.  Also, JPMorgan Chase said the technology sector would stop strongly outperforming due to earnings risks, unattractive valuations, and very high price relatives in the long-term context.

The U.S. Mar ISM manufacturing index fell -1.4 to 46.3, weaker than expectations of 47.5 and the steepest pace of contraction in 2-3/4 years.

U.S. Feb construction spending unexpectedly fell -0.1% m/m, weaker than expectations of no change.

Global bond yields Monday gave up overnight gains and turned lower after the U.S. ISM Mar manufacturing index disappointed.  The 10-year T-note yield fell -3.8 bp to 3.430%.  The 10-year German bund yield fell -3.7 bp to 2.255%.  The 10-year UK gilt yield fell -6.0 bp to 3.430%. 

Overseas stock markets Monday settled mixed.  The Euro Stoxx 50 closed down -0.09%.  China’s Shanghai Composite stock index closed up +0.72%, and Japan’s Nikkei Stock Index closed up +0.52%. 

Today’s stock movers…

Energy stocks and energy service providers rallied sharply Monday as the price of crude surged more than +6% to a 2-1/4 month high after OPEC+ announced it would cut its oil production by 1 million bpd.  Marathon Oil (MRO) closed up more than +9% to lead gainers in the S&P 500, and Diamondback Energy (FANG) closed up more than +6% to lead gainers in the Nasdaq 100.  Also, ConocoPhillips (COP) closed up more than +9%, and APA Corp (APA) and Hess Corp (HES) closed up more than +8%. In addition, Halliburton (HAL) closed up more than +7%, and Schlumberger (SLB) closed up more than +6%. Finally, Devon Energy (DVN) and Exxon Mobil (XOM) closed up more than +5%, and Chevron (CVX) and Occidental Petroleum (OXY) closed up more than +4%. 

Health insurance stocks rose Monday after the Centers for Medicare and Medicaid Services (CMS’s) final 2024 Medicare Advantage and Part D rate update shows the plan’s revenue will increase by 3.32% in 2024, above the consensus of 2.02%.  As a result, UnitedHealth Group (UNH) closed up more than 4% to lead gainers in the Dow Jones Industrials.  Also, Humana (HUM) closed up more than +5%, and Elevance Health (EV) closed up more than +3%.  In addition, Cigna Group (CI), CVS Health Corp (CVS), and Centene (CNC) closed up more than +2%.

PPG Industries (PPG) closed up more than +4% after raising guidance on Q1 adjusted EPS to $1.52-$1.58 from a prior view of $1.10-$1.20.

Allstate (ALL) closed up more than +3% after William Blair & Co upgraded the stock to outperform from market perform.

Raytheon Technologies (RTX) closed up more than +2% after the company was awarded a $1.2 billion foreign military contract from the U.S. Army to provide a Patriot Air Defense system for Switzerland. 

Tesla (TSLA) closed down more than -6% to lead losers in the S&P 500 and Nasdaq 100 after reporting Q1 vehicle deliveries of 422,875, just above the consensus of 421,164, disappointing some analysts who had been expecting a bigger beat, especially after the company cut vehicle prices in January.

Extra Space Storage (EXR) closed down more than -5% after the company purchased Life Storage for $12.4 billion. 

Catalent (CTLT) closed down more than -4% after Barclays downgraded the stock to equal weight from overweight.

Automatic Data Processing (ADP) and Paychex (PAYX) closed down more than -2% after Bank of America Global Research downgraded the stocks to underperform from neutral.

Airline stocks retreated on concern that Monday’s surge in crude prices to a 2-1/4 month high will boost jet fuel prices and weigh on company profits.  Southwest Airlines (LUV), United Airlines Holdings (UAL), and American Airlines Group (AAL) closed down more than -2%. Also, Delta Air Lines (DAL) closed down by more than -1%.

Across the markets…

June 10-year T-notes (ZNM23) on Monday closed up +17 ticks, and the 10-year T-note yield fell by -3.8 bp to 3.430%.  June T-notes Monday recovered from overnight losses and moved higher after the U.S. ISM manufacturing index fell more than expected, stoking concerns about economic growth.  T-notes on Monday initially posted moderate losses after a surge in crude prices increased inflation expectations and pushed the 10-year breakeven inflation rate up to a 3-1/2 week high. 

Investors Should Watch The ‘Golden’ Theme Of Unusual Options Volume

Broader Market Climbs As Bond Yields Fall On U.S. ISM Manufacturing Miss

• Price Cuts May Hurt Tesla’s Margins
• Broader Market Climbs as Bond Yields Fall on U.S. ISM Manufacturing Miss
• AT&T Keeps Its Dividend Flat at a 5.76% Yield, So Investors are Shorting Puts for More Income
• Markets Today: Stock Indexes Mixed as Soaring Crude Prices Spark Inflation Concerns