The stock market wrapped up Thursday with the S&P 500 Index ($SPX) (SPY) down -1.23%, the Dow Jones Industrials Index ($DOWI) (DIA) down -1.35%, and the Nasdaq 100 Index ($IUXX) (QQQ) down -1.55%. Despite starting positively, the market spiraled downwards due to hawkish comments made by Fed officials. Philadelphia Fed President Harker emphasized that “inflation is still too high,” while Minneapolis Fed President Kashkari hinted at the possibility of no Fed rate cuts this year if inflation does not show progress.
Initial optimism on Thursday, carried over from Wednesday as Fed Chair Powell hinted at future interest rate reductions, dissipated quickly. The sentiment soured further as US weekly jobless claims surpassed expectations, pointing to a sluggish labor market. Additionally, the US Feb trade deficit widened beyond forecast, marking its largest deficit in 10 months, spelling trouble for Q1 GDP growth.
Minneapolis Fed President Kashkari outlined a scenario for rate cuts based on inflation trends while Chicago Fed President Goolsbee downplayed early-year inflation spikes as transient. Contrarily, Richmond Fed President Barkin advocated for a cautious approach, urging the Fed to await clearer inflation signals before altering interest rates.
The market’s skepticism was palpable, with odds of a -25 bp rate cut at the upcoming FOMC meeting on April 30-May 1 estimated at 12%. Overseas markets, however, painted a slightly different picture by closing higher, with the Euro Stoxx 50 gaining 0.03%, as China observed the Tomb Sweeping Day holiday and Japan’s Nikkei Stock Index closing up 0.81%.
Interest Rates Impact
June 10-year T-notes (ZNM24) saw an upward trajectory, closing up +10.5 ticks on Thursday. The 10-year T-note yield experienced a decline of -2.6 bp, closing at 4.321%. T-note prices rebounded on account of dovish signals stemming from the rise in US initial jobless claims and the wider trade deficit in February, both favoring Fed policy. The renewed interest in T-notes was further fueled by a retreat in stock prices, hinting at increased safe-haven demand.
Hawkish Fed commentary tempered the T-bills gains, with rhetoric from Philadelphia Fed President Harker reinforcing inflation concerns. European government bond yields followed suit, with the 10-year German bund yield dropping -3.4 bp to 2.361% and the UK gilt yield falling -3.5 bp to 4.021%. The Eurozone witnessed lower Producer Price Index (PPI) figures for February but a higher Composite PMI, indicating a complex economic landscape.
US Stock Movements
Notable losers on Thursday included Lamb Weston Holdings (LW), which led the S&P 500 down more than -19%, and AbbVie (ABBV) closing more than -5% after revising its annual EPS forecast. Semiconductor stocks like Advanced Micro Devices, Nvidia, and others experienced losses following the hawkish Fed sentiments. Salesforce (CRM) also saw a -3% dip amid insider selling reports.
On the flip side, Levi Strauss & Co (LEVI) soared over +12% after impressive Q1 earnings, whereas MacroGenics (MGNX) surged more than +29% following positive feedback on its Tamarack drug trial. The defensive packaged food sector thrived even as the broader market faltered, with companies like Conagra Brands (CAG), General Mills (GIS), and others closing up.
Amidst ups and downs, General Electric (GE) managed to close up by more than +1% post a buy recommendation from Vertical Research Partners. The day saw a sea of change for various stocks, influenced by a complex interplay of market dynamics and external factors.
Earnings Reports for 4/5/2024
CXApp Inc (CXAI), DZS Inc (DZSI), Greenbrier Cos Inc/The (GBX), Maxeon Solar Technologies Ltd (MAXN) were among the companies slated to release earnings reports.
Stay up-to-date with the latest from Barchart for more insights, as market movements continue to reflect a delicate balance between optimism and caution.
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