US stocks tumble as Treasury yields rise, Middle East tensions simmer

Given the events of the weekend in Israel, I expect a crash first thing this morning. Instead all three indexes opened way up, the Dow up some 400 points, then began an immediate decline reaching break-even at 1 pm and then continuing to go steadily into the red the rest of the day to close down in the hefty 3-digits again.  A hugely positive retail sales report proved a double-edged sword. It proved the resilience of the American consumer, which is good, but also gave more fodder to the Fed for holding off rate cuts even longer.  

As today’s expert put it, “Market expectations have transitioned from three expected rate cuts this year down to fewer than two.”  This is the concern that has caused the equity rally to stall recently. Iran’s attack on Israel didn’t help but the minimal damage it caused did help.  Oil dropped because this damage was minimized but gold surged as investors sought safe havens. Volume came in a tad above the 4-week average at 11.7 billion. 

US stocks tumble as Treasury yields rise, Middle East tensions simmer

By Stephen Culp

Mon April 15, 2024 4:27 PM

DJ: 37,983.24  -475.84         NAS: 16,175.09  -267.10       S&P: 5,123.41  -75.65      4/12

DJ: 37,735.11  -248.13         NAS: 15,885.02  -290.08       S&P: 5,061.82  -61.59      4/15

NEW YORK, April 15 (Reuters) - Wall Street ended sharply lower on Monday amid rising U.S. Treasury yields as simmering tensions in the Middle East helped curb investor risk appetite.  The three major U.S. stock indexes reversed initial gains to extend Friday's sell-off, while the yen fell to its lowest level in 34 years, reviving intervention fears.  U.S. retail sales data for March blew past analyst expectations, provided the latest evidence in the case for the resilience of the American consumer but also suggested the U.S. Federal Reserve could hold off on cutting its key policy rate for longer than previously anticipated.

"Market expectations have transitioned from three expected rate cuts this year down to fewer than two," said Bill Merz head of Capital Market Research at U.S. Bank Wealth Management in Minneapolis. "That’s the concern that markets are reflecting while the equity rally has stalled in recent weeks."

On the geopolitical front, over the weekend Iran launched a missile and drone attack against Israel in retaliation for a suspected attack on its embassy, and calls for restraint regarding Israel's response appeared to be calming helping tensions in the region.  "I would say that the level of uncertainty is higher than it was a week ago on the geopolitical stage and it’s understandable to see higher market volatility in the current environment," Merz added. 

The Dow Jones Industrial Average (.DJI), opens new tab fell 248.13 points, or 0.65%, to 37,735.11, the S&P 500 (.SPX), opens new tab lost 61.59 points, or 1.20%, to 5,061.82 and the Nasdaq Composite (.IXIC), opens new tab dropped 290.08 points, or 1.79%, to 15,885.02.

European shares ended modestly higher as weak energy shares capped gains in industrial stocks, while cautions investors kept close watch on developments in the Middle East.  The pan-European STOXX 600 index (.STOXX), opens new tab rose 0.13% and MSCI's gauge of stocks across the globe (.MIWD00000PUS), opens new tab shed 1.01%.  Emerging market stocks lost 1.12%. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab closed 1.06% lower, while Japan's Nikkei (.N225), opens new tab lost 0.74%.

Yields for 10-year U.S. Treasuries rose, hitting their highest level since November after a robust Retail Sales report suggested the Fed could hold its key policy rate in restrictive territory for longer than expected.  Benchmark 10-year notes last fell 29/32 in price to yield 4.6158%, from 4.499% late on Friday.  The 30-year bond last fell 63/32 in price to yield 4.7323%, from 4.603% late on Friday.

The dollar touched its highest level since early November against a basket of world currencies as the yen dipped to a 34-year trough.  The yen move helped revive anticipation of the possibility of intervention on the part of Japanese authorities.  The dollar index (.DXY), opens new tab rose 0.15%, with the euro down 0.17% to $1.0624.  The Japanese yen weakened 0.60% versus the greenback at 154.23 per dollar, while Sterling was last trading at $1.2445, down 0.04% on the day.

Crude oil prices inched lower after Iran's weekend attack on Israel proved less damaging than anticipated.  U.S. crude dipped 0.29% to settle at $85.41 per barrel, while and Brent settled at $90.10 per barrel, down 0.39% on the day.  Gold surged on rising on safe-haven demand sparked by geopolitical tensions.  Spot gold added 1.8% to $2,385.39 an ounce. 

Per the CBOE, volume came in at 11.7 billion, again a tad above the 4-week average.