U.S. stocks on Tuesday made small moves, while Treasury yields extended their climb on a continued bond sell-off.
With Wall Street having sharply revised its interest rate cut expectations over the last two weeks, traders are looking ahead to an appearance from chair Jerome Powell later in the afternoon for further clues on monetary policy.
The tech-heavy Nasdaq Composite (COMP:IND) was marginally higher by 0.04% to 15,890.76 points in mid-day trade, while the S&P 500 (SP500) was little changed at 5,062.03 points. The blue-chip Dow (DJI) was up 0.44% to 37,901.79 points.
Of the 11 S&P sectors, six were in the red.
The benchmark S&P (SP500) on Monday notched back-to-back intraday losses of more than 1% for the first time since late October last year. The decline was driven by geopolitical concerns in the Middle East following the latest flare-up between Israel and Iran over the weekend, with several world leaders and governments urging against escalation. On Friday, the S&P (SP500) had posted its worst weekly performance also since last October on sticky inflation woes.
“Persisting inflation forces raise the risk that rates will need to stay higher for longer than expected, which could in turn weigh on economic activity and equity valuations. For a market reliant on immaculate disinflation, a dovish Fed reaction function, and diminishing tail risks on growth, the continuation of hot growth and inflation data can bring us to a tipping point where a tighter stock vs bond risk premium finally produces a market correction,” JPMorgan’s Marko Kolanovic said on Monday, adding that the brokerage was maintaining an overall defensive stance in its model portfolio.
Market participants also received a host of quarterly reports from major names and some economic data on the housing market in the run-up to Powell’s speech at 1315 ET. The Fed chief will be participating in a moderate discussion with Tiff Macklem, Governor of the Bank of Canada, at an event in Washington, D.C. Ahead of Powell, Fed Governor Philip Jefferson cautioned that an uncertain inflation outlook could prompt the central bank to keep rates higher for longer.
The S&P 500 Health Care sector was the biggest gainer on Tuesday, receiving a shot in the arm from a post-earnings surge in UnitedHealth (UNH). The health insurance giant topped quarterly profit estimates despite seeing an impact from a recent cyberattack at its Change Healthcare business. Other managed care players such as CVS (CVS) and Elevance Health (ELV) also got a boost.
Johnson & Johnson (JNJ) bucked the trend, with investors sending the pharmaceutical giant’s stock down after a weak quarterly sales performance.
Major lenders Bank of America (BAC) and Morgan Stanley (MS) saw differing reactions to their earnings reports. The former had erased a pre-market advance to trade lower while the latter was among the top percentage gainers on the S&P 500 (SP500). Both banks delivered a top and bottom line beat, partly due to a rebound in investment banking activity.
“Simply looking at top and bottom line results versus consensus expectations, 16 of 17 companies that have reported have beaten EPS estimates, while 13 of 16 have beaten sales estimates. Not a bad start to earnings season,” Bespoke Investment Group said on X (formerly Twitter).
Turning to the economic calendar, data showed that housing starts and building permits dropped more than anticipated in March. Additionally, U.S. industrial production picked up as expected in March.
Looking at the fixed-income markets, Treasury yields marched higher for a third straight session as traders continued to dump bonds. The longer-end 10-year yield (US10Y) hit 4.70% for the first time since early November last year, and was last up 5 basis points to 4.66%. The 30-year yield (US30Y) was up 3 basis points to 4.76%. The shorter-end more rate-sensitive 2-year yield (US2Y) was up 4 basis points to 4.97%.
See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.
