The whimsical dance of Wall Street took a somber turn as the new week ushered in a tumultuous ride for traders. After basking in the glow of 13 out of 14 positive weeks, a wave of uncertainty cast its shadow over the markets as traders hastily adjusted their sails, trimming their expectations regarding Fed interest rate cuts.
Stronger-than-expected economic data, twined with comments from Federal Reserve officials indicating a reluctance to reduce rates, wove a narrative that sparked a downturn in the major U.S. stock averages.
Both Fed Chair Jerome Powell and Minneapolis Fed President Neel Kashkari cautioned that monetary policy may remain constricted due to the enduring economic resilience, galvanizing a mood of restraint among traders.
In January, the services sector defied expectations, painting a landscape of robust growth as highlighted by the latest ISM PMI figures. This marked the most robust surge since September 2023 and lengthened the streak of 13 consecutive months of expansion.
The market sentiment took a sharp turn as traders backed away from the notion of a rate cut in March and remarkably pared down their rate cut projections for 2024, slicing off one rate cut last week and leaving a nub of just about five on Monday.
Amidst this climate, Treasury yields surged across all maturity levels, the 10-year yield orchestrating a crescendo of 13 basis points to 4.15%, triggering the dollar to fortify by 0.5% against a basket of major currencies.
Small-cap stocks bore the brunt of the downturn, with the iShares Russell 2000 ETF (IWM) stumbling by 1.2%. Although large-cap indices also witnessed declines, the impact was more tempered.
Conversely, oil prices staged a resurgence, with West Texas Intermediate (WTI) crude oil marking a 1% rise, fueled by escalating tensions in the Middle East. This turmoil was spurred by U.S. strikes over the weekend, targeting Iran-related sites in Syria and Iraq.
The Unfolding Drama in Major Indices, ETFs
| Major Indices & ETFs | Price | % |
|---|---|---|
| Nasdaq 100 | 17,619.42 | -0.1% |
| S&P 500 | 4,947.28 | -0.2% |
| Dow Jones | 38,389.00 | -0.7% |
| Russell 2000 | 1,940.18 | -1.1% |
The SPDR S&P 500 ETF Trust (SPY) edged lower by 0.2% to $493.17, the SPDR Dow Jones Industrial Average (DIA) dwindled by 0.7% to $383.95, while the tech-heavy Invesco QQQ Trust (QQQ) eased by 0.1% to $428.55, according to Benzinga Pro data.
In terms of sectors, the Technology SPDR Select Sector Fund (XLK) took the lead with a 0.3% ascent, closely followed by the Energy SPDR Select Sector Fund (XLE) with a 0.1% gain. On the flip side, notable laggards were the Real Estate SPDR Select Sector Fund (XLRE), plunging by 1.8%, and the Materials SPDR Select Sector Fund (XLY), down by 2.2%.
In the industry realm, semiconductors commanded the stage, with the VanEck Semiconductor ETF (SMH) soaring by 1.9%.
Stock Movers Painting the Picture
- Nvidia Corp. (NVDA) ascended by 4% following a bullish note by Goldman Sachs, which hoisted its price target on the chipmaker to $800.
- Meta Platforms Inc. (META) descended by 3% after surging as much as 20% on Friday.
- Snap Inc. (SNAP) tumbled by 4% after the company announced a 10% workforce reduction.
- Catalent Inc. (CTLT) rose by nearly 10% after Danish pharma giant Novo Nordisk A/S (NVO) inked a deal to acquire the company for $16.5 billion in cash.
- Caterpillar Inc. (CAT) surged by nearly 2% after reporting results that outshone expectations last quarter.
- Other companies reacting to earnings reports were McDonald’s Corp. (MCD), down 4%; Estee Lauder Companies Inc. (EL), up by 13%; Air Products & Chemicals Inc. (APD), down by 14%; ON Semiconductor Corp. (ON), up by 10%; and IDEXX Laboratories Inc. (IDXX), up by 6.4%.
- Among those gearing up to reveal their earnings post-closing were Vertex Pharmaceuticals Inc. (VRTX), Simon Property Group Inc. (SPG), and Palantir Technologies Inc. (PLTR).
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