Tepid US data hits stocks, lifts Treasury yields to over 5-month high

A huge drop all across the board and right out the gate, the Dow down some 700 points by 10 a.m., all attesting to how skittish this market is when even mildly bad news can cause such a panic. The Nasdaq and S&P suffered similar fates but the good news is that all three began a steady recovery that lasted all day and closed down with far fewer losses than at open. The tech sector took a beating with both Facebook and Meta reporting poor forecasts and GDP slowing down. This was despite the fact that Yellen gave a statement that the economy was likely stronger than suggested by Q1 output.  

But after hours, both Alphabet and Microsoft turned in positive Q1 reports and today’s expert opined, “Despite the expected GDP slowdown in 2024, there are no imminent signs of recession.” As is usually the case when equities sink, Treasury yields all went up, the 10-year note to 4.704% and 2-year to 4.996%.  There is still that inversion between the 2-year and 10-year but it appears to be closing. The yen reached a 34 year low but, contrary to concerns, there is no indication that Tokyo will be intervening. Volume was 10.9 billion, still a tad below the 4-week average. 

Tepid US data hits stocks, lifts Treasury yields to over 5-month high

By Chris Prentice and Marc Jones

Thu April 25, 2024 6:30 PM

DJ: 38,460.92  -42.77         NAS: 15,712.75  +16.11        S&P: 5,071.63  +1.08       4/24

DJ: 38,085.80  -375.12       NAS: 15,611.76  -100.99       S&P: 5,048.42  -23.21      4/25

NEW YORK/LONDON, April 25 (Reuters) - Stocks snapped a three-day winning streak on Thursday as disappointing forecasts from Facebook and Instagram owner Meta hammered the tech sector, and Japan's yen sank through 155 per dollar for the first time since 1990.  Tepid U.S. GDP data and Meta's slump (META.O), opens new tab weighed on equities.  U.S. Treasury yields hit their highest in over five months after the data showed signs of persistent inflation, lowering hopes that the Federal Reserve will cut interest rates anytime soon.  U.S. Treasury Secretary Janet Yellen told Reuters that U.S. economic growth was likely stronger than suggested by weaker-than-expected data on first-quarter output and said the Biden administration was keeping all options open to respond to threats from China's excess industrial capacity.  Gold prices rose, and oil prices finished higher.  MSCI's gauge of stocks across the globe (.MIWD00000PUS), opens new tab fell 3.87 points, or 0.51%, to 755.59.

The Dow Jones Industrial Average (.DJI), opens new tab fell 375.12 points, or 0.98%, to 38,085.80, the S&P 500 (.SPX), opens new tab lost 23.21 points, or 0.46%, to 5,048.42 and the Nasdaq Composite (.IXIC), opens new tab lost 100.99 points, or 0.64%, to 15,611.76.

Shares of Alphabet and Microsoft advanced in extended hours trading after both companies reported quarterly results that beat Wall Street estimates. However, Intel (INTC.O), opens new tab shares dropped 8% in extended hours trading after it forecast second-quarter revenue and profit below market estimates.

European shares closed down 0.7%, paring losses after shedding more than 1% intraday, hit by bleak earnings from consumer giant Nestle (NESN.S), opens new tab and Dutch digital payments firm Adyen (ADYEN.AS), opens new tab.  London's FTSE 100 (.FTSE), opens new tab held onto gains and touched a record high as UK-listed miner Anglo American (AAL.L), opens new tab surged on a $39 billion buyout offer from Australian rival BHP (BHP.AX), opens new tab. 

U.S. SLOWDOWN

Beyond corporate earnings, investors were digesting the sharper-than-expected slowdown in first-quarter U.S. economic growth.  "Despite the expected GDP slowdown in 2024, there are no imminent signs of a recession," said Mutual of America Capital Management's chairman and chief executive, Stephen Rich.

Hotter-than-expected inflation reports have pushed back and reduced expectations for Federal Reserve interest rate cuts, with markets now pricing in roughly a 70% chance of a first reduction in September. Investors are not even fully convinced there will be another cut this year, having expected around six cuts at the start of the year.

The dollar index softened 0.21% at 105.58, and the euro retreated 0.02% to $1.0727.  The yield on benchmark U.S. 10-year notes rose 5 basis points to 4.704%, from 4.654% late on Wednesday.  The 2-year note yield, which typically moves in step with interest rate expectations, rose 6.3 basis points to 4.9996%, from 4.937%.  The Japanese yen reversed earlier losses, up 0.03% against the greenback, after sinking to its lowest level in 34 years. It is now firmly past the latest line in the sand traders had drawn for Japan to intervene in the markets.  "Tokyo has still not intervened, and I reiterate that it does look like there will be no intervention so long as USD/JPY's climb continues in a relatively non-volatile fashion," said RBC Capital Markets' head of Asian FX strategy, Alvin Tan.  The Bank of Japan started its two-day rate-setting meeting on Thursday, with expectations that it will keep its key short-term interest rate target unchanged.  Attention will be on what Bank of Japan Governor Kazuo Ueda's says about the yen's struggles. 

Per CBOE, volume was 10.9 billion, still a tad below the 4-week average.