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Dow, S&P 500 Give Back Ground But Nasdaq Inches Higher

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April 01 2024 12:58PM

After failing to sustain an early move to the upside, stocks moved mostly lower over the course of the trading day on Monday. The Dow and the S&P 500 gave back ground after ending last Thursday’s trading at record closing highs, while the tech-heavy Nasdaq managed to end the day in positive territory.

While the Nasdaq (NASDAQI:COMP) inched up 17.37 points or 0.1 percent to 16,396.83, the Dow (DOWI:DJI) slid 240.52 points or 0.6 percent to 39,566.85 and the S&P 500 (SPI:SP500) dipped 10.58 points or 0.2 percent to 5,243.77.

The early strength on Wall Street came as traders finally had an opportunity to react to last Friday’s closely watched U.S. consumer price inflation data, which largely came in line with expectations.

The Commerce Department report said the annual rate of consumer price growth ticked up to 2.5 percent in February from 2.4 percent in January, in line with estimates.

Meanwhile, the annual rate of growth by core consumer prices, which exclude food and energy prices, slowed to 2.8 percent in February from an upwardly revised 2.9 percent in January.

Economists had expected the pace of core price growth to come in unchanged compared to the 2.8 percent originally reported for the previous month.

The readings on inflation, which are said to be preferred by the Federal Reserve, were included in the Commerce Department’s report on personal income and spending in February.

Buying interest remained somewhat subdued, however, as traders expressed uncertainty about whether inflation is slowing quickly enough to guarantee the interest rate cuts expected by the Fed.

The subsequent pullback by stocks came as a report from the Institute for Supply Management unexpectedly showing modest growth in U.S. manufacturing activity in the month of March contributed to a jump by Treasury yields.

The ISM said its manufacturing PMI jumped to 50.3 in March from 47.8 in February, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 48.4.

With the much bigger than expected increase, the index returned to expansion territory for the first time since September 2022.

The ISM said the prices index also jumped to 55.8 in March from 52.5 in February, as commodity driven costs remain unstable.

Sector News

Airline stocks came under considerable selling pressure over the course of the session, resulting in a 1.9 percent slump by the NYSE Arca Airline Index. The index gave back ground after ending last Thursday’s trading at a three-month closing high.

Significant weakness was also visible among interest rate-sensitive commercial real estate stocks, as reflected by the 1.8 percent loss posted by the Dow Jones U.S. Real Estate Index.

Interest rate-sensitive housing and telecom stocks also saw notable weakness on the day, dragging both the Philadelphia Housing Sector Index and the NYSE Arca North American Telecom Index down by 1.4 percent.

Banking, pharmaceutical and brokerage stocks also moved lower, while gold, computer hardware and semiconductor stocks moved to the upside.

Among semiconductor stocks, Micron Technology (NASDAQ:MU) surged by 5.5 percent after Bank of America raised its price target on the company’s stock to $144 per share from $120 per share.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Monday, with several major markets closed for holidays. Japan’s Nikkei 255 Index tumbled by 1.4 percent, while China’s Shanghai Composite Index jumped by 1.2 percent.

Meanwhile, the major European markets were all closed on the day for Easter Monday.

In the bond market, treasuries moved sharply lower in reaction to the latest U.S. economic data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 11.9 basis points at 4.325 percent.

Looking Ahead

Trading on Tuesday may be impacted by reaction to reports on factory orders and job openings as well as remarks by several Fed officials.