Stocks Fall as Bond Yields Climb on Strong US Economic News

Rich Asplund - Barchart - Tue Apr 2, 10:16AM CDT

The S&P 500 Index ($SPX) (SPY) this morning is down -1.06%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -1.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.51%.

Stock indexes this morning are moderately lower, with the S&P 500, Dow Jones Industrials, and Nasdaq 100 falling to 1-1/2 week lows. Higher bond yields are undercutting stocks as the 10-year T-note yield climbed to a 4-month high today 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 after today’s US economic news showed Feb JOLTS job openings and Feb factory orders rose more than expected, a hawkish factor for Fed policy.

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 64% for the following meeting on June 11-12.

Bitcoin (^BTCUSD) is down more than -5% today at a 1-week low, weighed down by slumping demand for Bitcoin ETFs and stronger-than-expected US economic news that has 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 today are mixed. The Euro Stoxx 50 fell back from a 23-year high and is down -0.70%. 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) this morning are down -7 ticks. The 10-year T-note yield is up +6.2 bp at 4.371%. June T-note prices today 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 are weighed down by today’s stronger-than-expected US economic news on Feb JOLTS job openings and Feb factory orders, adding to Monday’s stronger-than-expected news on Mar ISM manufacturing, hawkish factors for Fed policy that may delay the start of Fed rate cuts. Also, an increase in inflation expectations is undercutting T-note prices as today's 10-year breakeven inflation rate rose to a 1-1/2 week high of 2.372%.

European government bond yields today are moving higher. The 10-year German bund yield rose to a 1-1/2 week high of 2.435% and is up +11.4 bp at 2.412%. The 10-year UK gilt yield rose to a 2-week high of 4.105% and is up +14.6 bp at 4.078%.

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 are under pressure today 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, is down more than -13% to lead losers in the S&P 500. Also, CVS Health (CVS) is down more than -8%, and UnitedHealth Group (UNH) is down more than -6% to lead losers in the Dow Jones Industrials. In addition, Centene (CNC) and Molina Healthcare (MOH) are down more than -5%, and Elevance Health (ELV) is down more than -3%.

Tesla (TSLA) is down more than -6% 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) is down more than -22% after forecasting 2025 revenue will fall -6% to -7% compared with a +2% increase last year.

Verve Therapeutics (VERV) is 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) is 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 are falling today 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) are down more than -4%.

Cryptocurrency-linked companies are retreating today, with the price of Bitcoin down more than -5% at a 1-week low. As a result, Coinbase Global (COIN), MicroStrategy (MSTR), Marathon Digital (MARA), and Riot Platforms (RIOT) are down more than -5%.

Biomea Fusion (BMEA) is down more than -12% after JPMorgan Chase downgraded the stock to neutral from overweight, citing preliminary data from a diabetes trial.

GE Verona (GEV) is up more than +3% to lead gainers in the S&P 500 after RBC Capital Markets initiated coverage on the stock with a recommendation of outperform and a price target of $160.

Energy stocks and energy service providers are climbing today with the price of WTI crude oil up more than +1% at a 5-1/4 month high. As a result, Exxon Mobil (XOM), Phillips 66 (PSX), Marathon Petroleum (MPC), ConocoPhillips (COP), and Valero Energy (VLO) are up more than +1%.

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

Olema Pharmaceuticals (OLMA) is up more than +1% after Goldman Sachs initiated coverage of the stock with a recommendation of buy with a price target of $24.

McCormick & Co (MKC) is up more than +1% after Argus Research upgraded the stock to buy from hold with a price target of $88.

Mining stocks are gaining today, with gold prices climbing to a record high and copper and silver prices posting 1-1/2 week highs. As a result, Freeport McMoRan (FCX), Newmont (NEM), and Southern Copper (SCCO) are up more than +0.5%.

Earnings Reports (4/2/2024)

Cal-Maine Foods Inc (CALM), Dave & Buster's Entertainment (PLAY), DZS Inc (DZSI), and Paychex Inc (PAYX).

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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.