U.S. stocks mostly edged lower Monday, dragged down by investor worries over the timing of interest rate cuts by the Federal Reserve after stronger-than-expected manufacturing data pushed Treasury yields higher.

The Institute for Supply Management (ISM) said its manufacturing PMI increased to 50.3 last month, the highest and first reading above 50 since September 2022, from 47.8 in February. It suggested the manufacturing sector, which has been battered by higher interest rates, was recovering.

“If the economy is still somewhat strong and now that PMI data is starting to move up, that just suggests there could be some upside pressure in yields,” said Keith Lerner, chief market strategist at Truist Wealth in Atlanta.

Benchmark 10-year and two-year Treasury yields jumped to two-week peaks following the manufacturing data.

According to preliminary data, the S&P 500 lost 11.19 points, or 0.21%, to end at 5,243.16 points, while the Nasdaq Composite gained 15.17 points, or 0.09%, to 16,394.63. The Dow Jones Industrial Average fell 254.52 points, or 0.64%, to 39,552.85.

The U.S. rate futures market was pricing in a 58% chance of a rate cut in June, down from about 64% a week ago, according to the CME’s FedWatch tool.

“We would prefer a stronger economy with less rate cuts than a weaker economy with more rate cuts, but, on a short term basis, the narrative has moved to about three rate cuts,” Lerner added.

Key Fed officials — Governor Christopher Waller and Atlanta President Raphael Bostic — have said their preference is for fewer than three cuts this year.

Investors will get more clarity on the U.S. central bank’s thinking this week, with 13 of 19 Fed officials speaking.

Also, the U.S. monthly jobs report is due on Friday.

The majority of S&P 500 sectors were lower, with the real estate, healthcare, and utilities among the worst hit. The energy sector gained along with stronger crude oil prices.

The technology sector also rose, along with an index of semiconductors.

Among the day’s decliners, AT&T shares slipped after the U.S. telecoms giant announced a massive data leak that affected current and former account holders.

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