What you need to know…

The S&P 500 Index ($SPX) (SPY) Wednesday closed down -0.25%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.24%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.01%.

Stock indexes Wednesday settled mixed.  The broader market moved moderately lower after weaker-than-expected U.S. economic news on Mar ADP employment ad Mar ISM services activity fueled concerns about an economic slowdown.  Also, weakness in chipmakers led technology stocks lower after Japan joined the U.S. and Netherlands in restricting exports of chipmaking gear to China.  However, a more than +4% jump in Johnson & Johnson kept the Dow Jones Industrials in positive territory. 

Concerns that the global economy will slow as the world’s central banks keep raising interest rates weighed on stocks Wednesday.  The Reserve Bank of New Zealand raised its benchmark interest rate by 50 bp Wednesday, twice as much as expected. Also, Eurozone Governing Council member Vujcic said if core inflation in the Eurozone remains above 4%, "further interest rate hikes" can be expected.  In addition, Cleveland Fed President Mester Tuesday evening said to put inflation on a steady path down to 2%, monetary policy needs to move "somewhat further into restrictive territory this year, with the fed funds rate moving above 5% and the real fed funds rate staying in positive territory for some time."

The U.S. Mar ADP employment change rose +145,000, weaker than expectations of +210,000.

The U.S. Mar ISM services index fell -3.9 to 51.2, weaker than expectations of 54.4.

The U.S. Feb trade deficit expanded to -$70.5 billion, wider than expectations of -$68.8 billion and the most in 4 months, which has negative implications for Q1 GDP.

Global bond yields Wednesday retreated after weaker-than-expected economic reports on Mar ADP employment and Mar ISM services signaled weakness in the U.S. economy.  The 10-year T-note yield posted a 6-3/4 month low of 3.263% and finished the day down -4.9 bp at 3.290%.  Also, the 10-year German bund yield fell to a 1-week low of 2.164% and closed down -6.7 bp at 2.182%.  The 10-year UK gilt yield fell -0.6 bp to 3.428%. 

Overseas stock markets Wednesday settled lower.  The Euro Stoxx 50 closed down -0.39%. China’s Shanghai Composite stock index was closed for a holiday, and Japan’s Nikkei Stock Index closed down -1.68%. 

Today’s stock movers…

Chipmakers were under pressure Wednesday after Japan joined the U.S. and Netherlands in restricting exports of chipmaking gear to China.  As a result, Advanced Micro Devices (AMD) and Globalfoundries (GFS) closed down more than -3%. Also, KLA Corp (KLAC), Microchip Technology (MCHP), Nvidia (NVDA), Applied Materials (AMAT), and Lam Research (LRCX) closed down more than -2%. 

MarketAxess Holdings (MKTX) closed down more than -13% to lead losers in the S&P 500 after Citigroup said the company’s monthly volume statistics for March were “a bit mixed relative to our expectations.”

Albemarle (ALB) closed down more than -6% after Bank of America downgraded the stock to underperform from neutral. 

Cummins (CMI) closed down more than -3% after March class-8 truck orders, a key measure of demand in the trucking industry, fell -11.6% y/y.  Also, Deere (DE) closed down -6% and Paccar (PCAR) closed down -3% on the news.

Staffing service companies fell Wednesday on signs the U.S. labor market is softening after Mar ADP employment rose less than expected. As a result, Ceridian HCM Holding (CDAY) closed down more than -4% and Robert Half International (RHI) closed down more than -3%.

Western Alliance Bancorp (WAL) closed down more than -12% after analysts said they were disappointed the company did not give an explicit deposit balance during its quarter-end update.

Johnson & Johnson (JNJ) closed up more than +4% to lead gainers in the S&P 500 and Dow Jones Industrials after it agreed to pay $8.9 billion to resolve all cancer lawsuits related to its talc-based powders.

Utility stocks rose Wednesday on a defensive play against a slowing economy.  Xcel Energy (XEL) closed up more than +3% to lead gainers in the Nasdaq 100.  Also, American Electric Power (AEP), Evergy (EVRG), Eversource Energy (ES), Alliant Energy (LNT), WEC Energy (WEC), Entergy (ETR), FirstEnergy (FE), Exelon (EXC), NiSource (NI), and Duke Energy (DUK) closed up more than +2%.

UnitedHealth Group (UNH) and Cigna Group (CI) closed up more than +3% after Raymond James upgraded both stocks to a strong buy. 

Sealed Air Corp (SEE) closed up more than +2% after UBS raised its recommendation on the stock to buy with a price target of $59.

Across the markets…

June 10-year T-notes (ZNM23) on Wednesday closed up +10.5 ticks, and the 10-year T-note yield fell by -4.9 bp to 3.290%.  June T-notes Wednesday rose to a 1-1/2 week high, and the 10-year T-note yield fell to a 6-3/4 month low of 3.263%.  T-note prices Wednesday were supported by the weaker-than-expected Mar ADP employment change and Mar ISM services reports, which shows a slowdown in the U.S. economy that may prompt the Fed to stop raising interest rates.  Also, a decline in inflation expectations is bullish for T-notes after the 10-year breakeven inflation rate Wednesday fell to a 1-week low of 2.211%.  Hawkish comments from Cleveland Fed President Mester limited gains in T-notes when she said monetary policy needs to move "somewhat further into restrictive territory this year.”

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