Wall St closes lower; gold climbs amid economic, geopolitical crosswind

Today’s market movements are in the narrative below characterized as wavering “throughout the session,” but the charts tell a very different story, a story of the indexes being way up in the morning, the Dow reaching a height of a +330 at 11 a.m., then steadily declining thereafter to breakeven around 1 pm, then in the red, then struggling to just barely get out of the red by close. The S&P and Nasdaq suffered similar fates with the difference of staying in the red once they got there. There was no seesaw, no wavering, just a straight up, then a straight down. There was no explanation for the morning’s optimism, but the sell off was attributed entirely to the continuing angst over rate cut delays with yet another Fed statement, today from the NY Fed Prez, citing no needs for cuts now.  

The dynamic has changed so that now “whether or not there will be any interest rate cut at all this year.”  With such policy, why hasn’t there been a massive sell off, they ask?  “Corporate earnings seem to be strong and inflation continues to cool.”  Plus today’s data further undermined the case for cuts with lower jobless claims and solid factory data.  Treasury yields also supported the view that the inflation cool-down might have stalled. But there is a sliver of good news.  100 economists today predicted that there may well be two cuts this year, the first in September. As a safe haven, gold has reached yet another all-time high at $2,380/oz. Volume came in at 10.7 billion, still a bit below average.  

Wall St closes lower; gold climbs amid economic, geopolitical crosswinds

By Stephen Culp

Thu April 18, 2024 4:10 PM

DJ: 37,753.31  -45.66         NAS: 15,683.37  -181.88        S&P: 5,022.21  -29.20      4/17

DJ: 37,775.38  +22.07        NAS: 15,601.50  -81.87          S&P: 5,011.12  -11.09      4/18

NEW YORK, April 18 (Reuters) - U.S. stocks vacillated on Thursday, swinging from red to green and back as investors contended with the push-pull of a strong economy and restrictive Federal Reserve policy.  Benchmark Treasury yields resumed their climb and gold added strength as ongoing turmoil in the Middle East bolstered the safe-haven play.  All three major U.S. stock indexes wavered throughout the session, with weakness in the chip sector weighing the Nasdaq down the most.  The S&P 500 joined the Nasdaq in the red, while the blue-chip Dow eked out a nominal gain.  All three indexes were on course for weekly declines.  New York Fed President John Williams, citing economic strength, said on Thursday he does not see a convincing case for cutting the central bank's policy rate now. On Tuesday Fed Chair Jerome Powell declined to provide guidance on when rates might be lowered.

"Markets are still recalibrating what 'higher for longer' means and whether or not there will be any interest rate cut at all this year from the Fed," said Oliver Pursche, senior vice president at Wealthspire Advisors in New York.  "If four months ago I said there's a real possibility the Fed won't lower rates at all in 2024, the response would have likely been that will create a massive sell off in stocks," Pursche added.  "So why hasn't it? The reason is corporate earnings seem to be strong, the economy is continuing to perform well and inflation continues to cool down albeit in an uneven manner," he said.  A Reuters poll of 100 economists indicated the Fed will implement its first rate cut in September, and cut perhaps once more this year.

"Ultimately every central bank prefers being neutral in its policy stance as opposed to either accommodative or restrictive," Pursche said. "The Fed wants to be able to signal that they've done a good job and the best way to do that is to lower rates."  Economic data released on Thursday painted a mixed picture, with low jobless claims and solid factory data versus weaker-than-expected home sales and leading economic index readings.

The Dow Jones Industrial Average (.DJI), opens new tab rose 22.07 points, or 0.06%, to 37,775.38, the S&P 500 (.SPX), opens new tab lost 11.09 points, or 0.22%, to 5,011.12 and the Nasdaq Composite (.IXIC), opens new tab dropped 81.87 points, or 0.52%, to 15,601.50.

European stocks ended higher as upbeat results lifted the benchmark index, offsetting uncertainties surrounding geopolitical tensions and the timing of central bank rate cuts.  The pan-European STOXX 600 index (.STOXX), opens new tab rose 0.24%, while MSCI's gauge of stocks across the globe (.MIWD00000PUS), opens new tab %.  Emerging market stocks rose 0.46%. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab closed 0.57% higher, while Japan's Nikkei (.N225), opens new tab rose 0.31%. 

Treasury yields hovered near their highest levels since November as solid economic data reinforced warnings from Fed officials that the inflation cool-down might have stalled.  Benchmark 10-year notes last fell 12/32 in price to yield 4.6326%, from 4.585% late on Wednesday.  The 30-year bond last fell 16/32 in price to yield 4.7323%, from 4.699% late on Wednesday.

Crude oil prices held near a three-week low as mixed economic data was offset by U.S. sanctions on Venezuela and Iran and simmering Middle East tensions .  U.S. crude inched up 0.05% to settle at $82.73 per barrel, while Brent settled at $87.11 down 0.21% on the day.  Gold climbed as the safe-haven metal benefited from ongoing Middle East turmoil and the prospect of fewer than expected U.S. rate cuts this year.  Spot gold added 0.8% to $2,379.98 an ounce. 

Per the CBOE, volume came in at 10.7 billion, still a bit below average.