U.S. stocks on Wednesday ate into their gains in choppy trading, as market participants adjusted their portfolios towards the end of a quarter that has seen Wall Street advance nearly 10%.
All three major averages opened in the green but have since moved lower. The tech-heavy Nasdaq Composite (COMP:IND) had reversed course in mid-day trade, last down 0.04% to 16,309.03 points. The benchmark S&P 500 (SP500) gained 0.25% to 5,216.33 points, while the blue-chip Dow (DJI) was higher by 0.49% to 39,475.75 points.
Of the 11 S&P sectors, nine were in the green, led by Utilities. Communication Services and Technology were the two losers.
With Thursday marking the end of Q1 2024, volatility has been expected in this week as traders take a look at their holdings and make changes. That was evinced by yesterday’s session which saw a sharp reversal in equities from positive into negative territory towards the end of trading.
“As we continue to draw closer to the Easter holiday, it remained quiet in markets yesterday other than for a sizeable late sell-off in U.S. equities which came a bit out of the blue … The S&P 500 (SP500) had looked set for a very narrow but positive trading range, but then sold off by nearly half a percent in the final 30 minutes of the session, seemingly driven by quarter-end positioning,” Deutsche Bank’s Jim Reid said.
This week also features a trading holiday on account of Good Friday. That day also happens to feature two important events – the release of the Federal Reserve’s preferred inflation gauge and chair Jerome Powell’s participation in a moderated discussion at a San Francisco Fed conference.
On Wednesday, some of the spotlight was grabbed by news coming out of Japan. The Asian country’s currency earlier fell to a 34-year low against the U.S. dollar (USD:JPY). The move came on the back of the Bank of Japan’s (BoJ) major policy overhaul last week, dovish remarks by BoJ board member Naoki Tamura and over greater chances of intervention in the currency market to slow the yen’s drop.
JPMorgan’s Rie Nishihara expects to see some “moderate yen appreciation when the bond and currency markets begin to fully factor in Fed rate cuts.”
“Whether the turning point will be the May or June FOMC meeting or the release of the May meeting minutes depends on the data that come out, but we think Japanese stocks and stock selection will be affected after the turning point a few months from now,” Nishihara said.
“In other words, in the short term, until the turning point a few months out, JPY’s underlying depreciation is unlikely to change much. In addition to such structural changes as a virtuous cycle of rising wages and prices, increasing capital investment, and companies’ improved use of capital, JPY depreciation is likely to support exporters and corporate earnings,” Nishihara added.
Turning to the fixed-income markets, U.S. Treasury yields were lower. The longer-end 30-year yield (US30Y) was down 3 basis points to 4.37%, while the 10-year yield (US10Y) was down 4 basis points to 4.20%. The shorter-end more rate-sensitive 2-year yield (US2Y) was down 3 basis points to 4.56%.
See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.
Looking at Wednesday’s active stocks, Carnival (CCL) was holding onto slight gains after the world’s largest cruise line operator delivered a record quarter for revenue, net yields and bookings. The company also warned that the recent collapse of Baltimore’s Francis Scott Key bridge could clip its annual profit by $10M.
GameStop (GME) slumped about 15% after the videogame retailer’s holiday quarter earnings report disappointed investors.
