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Stock market today: Stocks slide as oil, yields touch 2024 highs

US stocks closed in a sea of red, but off of their session lows, as investors digested the possibility that an interest rate cut will come later than hoped.

The Dow Jones Industrial Average (^DJI) closed down about 1%, or nearly 400 points, setting the blue-chip index back from a bid to reach the key 40,000 level. The S&P 500 (^GSPC) shed about 0.7%, while the tech-heavy Nasdaq Composite (^IXIC) also slid nearly 1%.

US bonds continued to struggle, as the yield on the benchmark 10-year Treasury (^TNX) rose to around 4.36%, hovering at its highest levels of 2024. Oil also jumped with crude prices (CL=F) rising to trade above $85 a barrel.

Stocks have made a lackluster start to the second quarter after racking up a string of records in the first months of 2024. Hotter-than-expected manufacturing readings, which came alongside increases in prices paid, have given weight to growing doubts the Federal Reserve will cut rates in the first half of the year as the US economy shows surprising resilience.

In economic news, the new data from the Bureau of Labor Statistics showed job openings were marginally higher in February while hiring ticked up slightly.

A pullback in health insurer stocks came after US regulators surprised the industry by failing to boost payments for private Medicare plans as usual. Humana (HUM) shares fell more than 13%, while CVS (CVS) shed roughly 7%.

In single stock moves, Tesla (TSLA) stock stumbled about 5% after the company delivered fewer cars than expected in the first quarter.

  • Dow closes down about 400 points

    US stocks closed in a sea of red, but off of their session lows, as investors digested the possibility that an interest rate cut will come later than hoped.

    The Dow Jones Industrial Average (^DJI) closed down about 1%, or nearly 400 points, setting the blue-chip index back from a bid to reach the key 40,000 level. The S&P 500 (^GSPC) shed about 0.7%, while the tech-heavy Nasdaq Composite (^IXIC) also slid nearly 1%.

    The yield on the benchmark 10-year Treasury (^TNX) rose to around 4.36%, hovering at its highest levels of 2024. Oil also jumped with crude prices (CL=F) rising to trade above $85 a barrel.

  • More signs of normal in the labor market

    Investors searching for further signs of cooling in the labor market don't need to look any further than a nice ice cold Beveridge Curve.

    The traditional chart, released by the Bureau of Labor Statistics, tracks the unemployment rate and job openings rate. New data out from BLS on Tuesday showed the job openings rate remained at 5.3%, inching closer to levels seen pre-pandemic.

    But EY chief economist Greg Daco prefers another version of this curve, subbing out the job openings rate for the quits rate. Given the massive surge in job openings over the pandemic, that metric has become increasingly "a poor reading on the state of the labor market," Daco told Yahoo Finance.

    The quits rate, Daco reasons, is a better measure because it's a gauge of an "actual transaction" between a worker and their employer. And that number has remained at 2.2% for four consecutive months.

    Making the change for the quits rate, as we did in the chart below, shows the recent curve points are increasingly in line with where the labor market stood before the pandemic.

    "You have a quits rate that's back to 2018 levels and an unemployment rate that's back to 2019 levels," Daco said. "From that perspective, the soft landing has been achieved."

    Daco notes the going concern last year was that dots on the chart would move out to the right, with an increase in unemployment (as seen in the purple "Great Recession" line). This would indicate an economic slowdown underway.

    But, for now, that simply hasn't been the case.

    Consensus expects that to continue in the data released on Friday with the March jobs report. Economists are projecting the unemployment rate fell to 3.8% in March, down from 3.9% in February, per Bloomberg consensus data, keeping the curve in the the green soft landing box in the alternative Beveridge Curve.

  • Vix sees biggest jump in 6 weeks

    Vix (^VIX), otherwise known as the volatility index, saw its biggest jump in six weeks on Tuesday after it jumped as much as 13% to trade near 15.4, its highest level since February.

    The moves come as investors grapple with the possibility that an interest rate cut will come later than hoped after hotter-than-expected manufacturing readings, coupled with increases in prices paid, have given weight to growing doubts the Federal Reserve will cut rates in the first half of the year.

    In equities, tech-heavy stocks led the declines. The Nasdaq Composite (^IXIC) slid roughly 1.2% while the Dow Jones Industrial Average (^DJI) slipped about 1.1%, or more than 400 points. The S&P 500 (^GSPC) shed about 0.9%.

  • Tesla, Humana, GE: Stocks trending in afternoon trading

    Tesla (TSLA): The EV maker reported a significant delivery miss for the first quarter, sending shares down as much as 6%. The disappointing report comes after the company warned in January that its vehicle volume growth rate would be "notably lower" than in 2023.

    Humana (HUM), UnitedHealth Group (UNH): The health insurer stocks fell by 14% and 8%, respectively, on Tuesday after US regulators failed to increase payments for Medicare Advantage plans in line with Wall Street estimates. The "surprise" decision impacted other companies with exposure to Medicare insurance with shares of CVS (CVS) down 8%.

    General Electric (GE): The industrial giant completed the spin-off of its clean energy business GE Vernova, which began trading under the ticker symbol GEV on Tuesday. GEV jumped more than 6% in its NYSE debut. The remaining company, GE Aerospace, will continue to trade under the GE ticker.

  • Silver Lake to take UFC owner Endeavor private

    Private equity firm Silver Lake Management will take sports and entertainment giant Endeavor Group Holdings (EDR) private in a deal that values the UFC owner at $13 billion, the companies announced on Tuesday.

    According to a press release, Silver Lake will acquire 100% of the outstanding shares it does not already own, while stockholders of Endeavor will receive $27.50 per share in cash. This represents a 55% premium to the closing price of $17.72 on Oct. 25, 2023 — the last full trading day before Silver Lake said it was working on "strategic alternatives" to take the company private.

    Shares of Endeavor, which were briefly halted prior to the announcement, rose about 2% to trade just under $26.

    "Since 2012, Endeavor’s strategic partnership with Silver Lake and Egon Durban have been central to our evolution into the global sports and entertainment leader we are today," Endeavor CEO Ari Emanuel said in a statement. "We believe this transaction will maximize value for all of Endeavor’s public stockholders and are excited to continue to unlock and invest in the growth opportunities ahead as a private company."

    Endeavor, which owns talent agency WME, also serves as the majority owner of TKO Group Holdings (TKO), the parent company of UFC and WWE.

    TKO is not party to this transaction and will remain a publicly traded company. Shares rose more than 5% on the heels of the announcement.

  • Fed’s Mester still expects 3 rate cuts 'later' this year

    Cleveland Fed president Loretta Mester said Tuesday that she still expects three interest rate cuts this year as the inflation picture hasn't "changed very much," despite recent choppy readings.

    "If the economy evolves as expected, then in my view it will be appropriate for the FOMC to begin reducing the fed funds rate later this year," Mester said in a speech to the National Association for Business Economics in Cleveland.

    Yahoo Finance's Jennifer Schonberger reports:

    While Mester expects inflation to continue dropping over time, she says she needs to see more data to gain confidence.

    "In my view, the inflation picture has not changed very much since the start of the year, because I had already thought that the pace of disinflation would slow down this year," she said.

    "Some further monthly readings will give us a better sense of whether the disinflation process is stalling out or whether the start-of-the-year readings reflect a temporary detour on the downward path back to price stability."

    Mester became the latest Fed official to offer assurances about the overall inflation picture, while at the same time making it clear the Fed is in no hurry to ease monetary policy.

    A new inflation report released Friday showed a slight cooling in the Personal Consumption Expenditures index, which is the Fed's preferred inflation gauge. That followed stickier readings in January and February from other gauges, such as the Consumer Price Index.

    Fed Chair Jerome Powell said Friday that the new PCE report was "not as low as most of the good readings we got in the second half of last year, but it's definitely more along the lines of what we want to see," sticking to an assertion that inflation is still on a "bumpy path" to the central bank's goal of 2% during a question and answer session at a San Francisco Fed conference.

  • High-income consumers are getting election jitters

    Consumers are on my mind as seen by my post earlier in the day, and below.

    A new survey of 2,000 US consumers is out today from Morgan Stanley's AlphaWise team (they do a good amount of survey work for their clients). Collectively, the findings paint the picture of a consumer with a host of worries that could hold back spending in the spring and summer.

    Dealing with inflation continues to be consumers’ top concern for 2024, with 64% of respondents worried about rising prices. The political environment in the US is the second-most-listed primary concern, cited by 47% of consumers and higher among upper-income consumers.

    The election concern amongst higher-income shoppers should be of most worry to investors as this cohort has been a key driver of retail sales going on two-plus years.

    High income consumers are getting election jitters.
    High-income consumers are getting election jitters. (Morgan Stanley)
  • Wedbush downgrades homebuilders during 'normal' year for housing

    Wedbush on Tuesday downgraded shares of five homebuilder stocks, citing seasonality headwinds during what it called the most "normal" year for housing trends since 2019.

    The firm downgraded all five stocks to Underperform from Neutral, lowering its price target on Century Communities (CCS) to $82 from $92, LGI Homes (LGIH) to $74 from $88, and Meritage Homes Corporation (MTH) to $148 from $155 while keeping its price targets unchanged on DR Horton (DHI) and Lennar (LEN) shares.

    "No year in homebuilding ever follows a precise timeline of perfectly rising demand in the spring followed by a seasonally normal decline in demand into the summer," wrote Wedbush analyst Jay McCanless.

    "However, 2024 has been the most 'normal' year we have seen for the home building industry since 2019 in terms of normal seasonality. Consequently, we believe these names could see a normal seasonal stock price decline into the summer especially after the seasonal trade window closes in April/May."

    The firm, notably, kept earnings estimates unchanged for all five stocks.

    The bearish call comes as the stocks, excepting Lennar, have underperformed the iShares US Home Construction ETF (ITB) since the beginning of the year.

    "We think this underperformance could worsen if land acquisition and development costs continue rising and if lumber prices continue appreciating," McCanless wrote.

    Higher-for-longer interest rates and a lack of housing supply have allowed builders to focus their attention on an underserved segment — the entry-level buyer. Builders have offered price cuts and incentives to drive up volume. But that strategy has negatively squeezed gross margins.

    McCanless anticipates the same storyline will happen in the second quarter of this year as mortgage rates remain near highs of the cycle. The 30-year fixed rate loan inched down to 6.79% from 6.87% a week prior, according to Freddie Mac.

    Many housing economists believe mortgage rates are likely to decline in the back half of the year as the Federal Reserve cuts interest rates. But McCanless doesn't think the move will be that mechanical.

    "We think that is still the consensus view in the market, but we are taking the opposite view on that front because we believe mortgage originators (bank and nonbank) are unwilling to bear the prepayment risk without being compensated for that risk," he noted.

    McCanless also notes the spread between the 30-year mortgage and the 10-year Treasury is "artificially wide" today to account for refinancing risk.

  • Bond yield moves may be a "head fake"

    A hotter than expected prices paid index inside the March ISM release appeared to hold weight for investors. Bond yields shot up following the release and while investors inched closer to pricing in one less rate cut for this year, per Bloomberg data.

    Prices paid increased in both the S&P Global and ISM readings.

    S&P Global noted average selling prices charged by producers increased at their fastest rate in 11 months. The ISM's prices paid sub-index rose to 55.8 in March, the highest since July 2022.

    Chris Williamson, S&P Global Market Intelligence chief business economist said this could be a sign of concern given a recent slowdown in the decline of inflation seen in both January and February's readings of popular inflation measures.

    "Most notable was an especially steep rise in prices charged for consumer goods, which rose at a pace not seen for 16 months, underscoring the likely bumpy path in bringing inflation down to the Fed's 2% target," Williamson said.

    To Renaissance Macro's head of economics Neil Dutta this increase shouldn't be overly concerning for the overall inflation story. He views the move in bond yields as a "head-fake."

    "Formal analysis reveals that while the ISM prices paid index helps improve forecasts of PPI inflation, it does not yield improved forecasts of PCE or core PCE inflation," Dutta wrote in a research note on Tuesday. "This is a reminder that the ISM prices paid index is largely a proxy for energy prices and energy price pass-through to consumer prices is low."

    Dutta added the recent increases in labor productivity can also help quell inflationary pressures. The ISM production index rose to 54.6 in March, its highest level since June 2022. This came without a jump in the employment index.

    "Taken at face value, this implies a pretty solid pick-up in manufacturing sector productivity growth in the coming quarters," Dutta wrote. "You do not have inflation problems when productivity is running this strong."

  • Job openings steady in February as hiring picks up slighltly

    New data from the Bureau of Labor Statistics released Tuesday showed there were 8.76 million jobs open at the end of February, a slight increase from the 8.75 million job openings in January, which was revised lower. Economists surveyed by Bloomberg had expected 8.73 million openings in February.

    The report also showed the quits rate, a sign of confidence among workers, sat at 2.2% for the fourth consecutive month. Additionally, the Job Openings and Labor Turnover Survey (JOLTS) showed 5.8 million hires were made in the month, a slight increase from the 5.7 million seen in January.

    The hiring rate picked up slightly at 3.7% in February, up from the 3.6% rate seen in January.

  • Stocks open lower after yields spike to 2024 highs

    Stocks were lower on Tuesday as bond yields rose for the second straight day.

    The Dow Jones Industrial Average (^DJI) slipped almost 1%, or over nearly 400 points, setting the blue-chip index back from a bid to reach the key 40,000 level. The S&P 500 (^GSPC) shed 0.8%, while the tech-heavy Nasdaq Composite (^IXIC) fell 1.2%.

    The 10-year Treasury yield (^TNX) popped roughly six basis points to nearly 4.39%, its highest level of 2024. This move comes after a hotter-than-expected reading on price increases in March's ISM stoked inflation concerns and sent the 10-year Treasury yield up more than 10 basis points on Monday.

    The 10-year Treasury yield is now at its highest level since November and has surpassed a level Morgan Stanley chief investment officer Mike Wilson recently flagged as critical for stock investors.

    "We view 4.35% on the 10-year US Treasury yield as an important technical level to watch for signs that rate sensitivity may increase for equities," Wilson wrote in a note on March 17.

    Wilson noted that large caps have been less sensitive to rates recently. "Small caps are likely to show more rate sensitivity than large caps on a move higher in yields," he said.

    To Wilson's point, the small-cap Russell 2000 index (^RUT) sagged more than 1% in early trade Tuesday.

  • Tesla shares slide after delivery miss

    Tesla stock (TSLA) stumbled in premarket trading, falling about 7% after the company delivered fewer cars than expected in the first quarter.

    Tesla announced it delivered 386,810 cars in the first quarter, below Wall Street's estimates of 449,080. This marked the first annual Q1 decline in deliveries since 2020.

  • Consumer stocks in focus with gas prices on the rise

    Stocks levered to the spending of consumers could become ice cold this spring.

    Oil prices hit $85 a barrel this morning, a five-month high. The advance in oil, which may be starting to weigh on the broader market, has lit a fire under nationwide gas prices. The national average for gas prices of $3.51 a gallon last week was unchanged week on week — and that was after prices rose for four straight weeks.

    Even still, gas prices were up $0.16 per gallon from a month ago.

    "While we seem to be nearing a short-term peak, one word of caution for those in the Mid-Atlantic and Northeast: you haven’t yet finished the transition to summer gasoline, so you may experience some sticker shock in a few weeks," said Patrick De Haan, head of petroleum analysis at GasBuddy, in a new blog post. "Be prepared for somewhat of a punch. For the rest of the nation, so long as we don’t see extenuating circumstances, we’re likely close to a top in prices. Let’s hope it pans out and sticks!"

    As gas prices have risen, the Consumer Discretionary Select Sector SPDR Fund (XLY) has dropped 1.4% in the past month — perhaps on fears of weakening consumer spending. Key discretionary retailers in the fund, such as Amazon (AMZN), Starbucks (SBUX), and Nike (NKE), have relatively underperformed the S&P 500 in the last month.

    Interestingly, Walmart’s (WMT) stock is up 2% in the past month as investors view the retailer as a trade down play on higher gas prices.

  • Health insurer stocks tank

    Health insurer stocks are being sent to their sickbeds on Tuesday.

    Humana (HUM) is getting drilled by 9% premarket, with pressure also being seen on UnitedHealth Group (UNH) and Cigna (CI). The sell-offs come as US regulators failed to increase payments for Medicare Advantage plans in line with Wall Street estimates.

    Payments will rise by 3.7% on average in 2025, down about 0.2% year over year.

    Longtime healthcare analyst at JPMorgan Lisa Gill said in a client note that the decision came as a "surprise," as many on the Street expected an increase "given the utilization environment."

    Humana is seen as the most exposed to the decision from the Centers for Medicare and Medicaid Services.

    A key call-out from Humana's latest annual report:

    "At December 31, 2023, we provided health insurance coverage under CMS contracts to approximately 5,408,900 individual Medicare Advantage members, including approximately 851,300 members in Florida. These Florida contracts accounted for premiums revenue of approximately $14.9 billion, which represented approximately 19% of our individual Medicare Advantage premiums revenue, or 14% of our consolidated premiums and services revenue for the year ended December 31, 2023."

    RBC analyst Ben Hendrix said in a note this morning Humana's profit guidance will have to be reset in the wake of the decision and the stock could stay under pressure. Conversely, Hendrix is recommending to clients to buy Cigna shares on the pullback.