U.S. Stocks Extend Sell-Off As Treasury Yields Surge After Retail Sales Data
April 15 2024 - 4:38PM
IH Market News
Following the steep drop seen last Friday, stocks showed another
substantial move to the downside over the course of the trading
session on Monday. The major averages moved notably higher early in
the session but pulled back sharply as the day progressed.
The major averages all closed firmly in the red, with the
tech-heavy Nasdaq showing a particularly steep drop. The Nasdaq
(NASDAQI:COMP) plunged 290.08 points or 1.8 percent to 15,885.02,
the S&P 500 (SPI:SP500) tumbled 61.59 points or 1.2 percent to
5,061.82 and the Dow (DOWI:DJI) slid 248.13 points or 0.7 percent
to 37,735.11.
With the extended slump, the Dow fell to a nearly three-month
closing low, while the Nasdaq and the S&P 500 hit their lowest
closing levels in almost two months.
The early strength on Wall Street partly reflected a positive
reaction to earnings news from Goldman Sachs (NYSE:GS), as the
investment banking company reported first quarter earnings that far
exceeded analyst estimates on better than expected revenues.
Traders also initially reacted positively to a Commerce
Department report showing much stronger than expected U.S. retail
sales growth in the month of March.
The Commerce Department said retail sales climbed by 0.7 percent
in March after advancing by an upwardly revised 0.9 percent in
February.
Economists had expected retail sales to rise by 0.3 percent
compared to the 0.6 percent increase originally reported for the
previous month.
Excluding a pullback by sales by motor vehicle and parts
dealers, retail sales jumped by 1.1 percent in March after climbing
by 0.6 percent in February. Ex-auto sales were expected to rise by
0.4 percent.
Buying interest evaporated shortly after the start of trading,
however, as the retail sales data triggered another spike by
treasury yields.
The yield on the benchmark ten-year note surged to its highest
levels in five months, as the data led to renewed concerns about
the outlook for interest rates.
Following the latest data, CME Group’s FedWatch Tool is
currently indicating just a 21.6 percent chance of a quarter point
rate cut in June.
“The robust gain in retail sales in March followed by upward
revisions in the prior two months shows the consumer continues to
power the overall economy forward,” said Nationwide Chief Economist
Kathy Bostjancic.
However, she added, “The lack of moderation in consumer spending
and inflation will undermine Fed officials’ confidence that
inflation is on a sustainable course back to 2% and likely delays
rate cuts to September at the earliest and could push off rate
reductions to next year.”
Sector News
Software stocks moved sharply lower over the course of the
session, dragging the Dow Jones U.S. Software Index down by 2.4
percent to its lowest closing level in almost two months.
Considerable weakness also emerged among networking stocks, as
reflected by the 2.0 percent slump by the NYSE Arca Networking
Index. The index tumbled to a four-month closing low.
Interest rate-sensitive commercial real estate stocks also saw
significant weakness, with the Dow Jones U.S. Real Estate Index
falling by 1.7 percent.
Computer hardware, housing and biotechnology stocks also came
under pressure over the courses of the session, moving lower along
with most of the other major sectors.
Other Markets
In overseas trading, stock markets across the Asia-Pacific
region moved mostly lower on Monday. Japan’s Nikkei 225 Index and
Hong Kong’s Hang Seng Index both slid by 0.7 percent, although
China’s Shanghai Composite Index bucked the downtrend and jumped by
1.3 percent.
Meanwhile, the major European markets turned in a mixed
performance on the day. While the U.K.’s FTSE 100 Index fell by 0.4
percent, the French CAC 40 Index rose by 0.4 percent and the German
DAX Index climbed by 0.5 percent.
In the bond market, treasuries moved sharply lower in reaction
to the retail sales data. As a result, the yield on the benchmark
ten-year note, which moves opposite of its price, surged 12.9 basis
points to a five-month closing high of 4.628 percent.
Looking Ahead
Reports on housing starts and industrial production may attract
attention on Tuesday along with remarks by Fed Chair Jerome
Powell.
On the earnings front, Bank of America (NYSE:BAC), Johnson &
Johnson (NYSE:JNJ), Morgan Stanley (NYSE:MS) and UnitedHealth
(NYSE:UNH) are among the companies due to report their quarterly
results before the start of trading.
SOURCE: RTTNEWS
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