Indexes close lower due to the timing of rate cuts

Tue Apr 02 2024
Rajesh Sharma (2060 articles)
Indexes close lower due to the timing of rate cuts

Shares of electric vehicle manufacturer Tesla sank after the company reported fewer quarterly deliveries for the first time in nearly four years, while U.S. markets declined on Tuesday as investors considered the possibility that the Federal Reserve may postpone lowering interest rates.

The 4.9% decline in Tesla shares was a major drag on the Nasdaq and S&P 500. Among the day’s worst performers were healthcare shares as well. After the federal government maintained its reimbursement rates for Medicare Advantage health plan providers constant, shares of UnitedHealth, CVS Health, and Humana all took a nosedive.

As 10-year yields on U.S. Treasuries reached their highest point since late November, investor apprehension intensified. There has been growing uncertainty on the Fed’s ability to implement the three rate cuts proposed in its most recent forecast, despite recent strong economic data from the United States.

Despite the Fed’s probability of a rate decrease this year, the “higher for longer” narrative is making a roundabout return. A chief global strategist at LPL Financial in Charlotte, North Carolina, Quincy Krosby, stated that this has caused concern in the market.

A decline of 396.61 points, or 1%, brought the DJI to 39,170.24 on the stock market. A loss of 37.96 points, or 0.72%, brought the S&P 500 (SPX) to 5,205.81 and a loss of 156.38 points, or 0.95%, brought the Nasdaq Composite (IXIC) to 16,240.45. Fear on Wall Street, as measured by the CBOE Volatility index (.VIX), increased.

Krosby predicted that this retreat would occur in healthy markets. As of this writing, the S&P 500 is still up around 9% for the year.

On Tuesday, statistics showed that new orders for items manufactured in the United States came back stronger than predicted in February, and that job opportunities in the United States remained stable at elevated levels.

Rate cut expectations in the market have been reduced from three in the past few weeks to approximately two, as shown by LSEG’s rate likelihood app.
The Federal Reserve is not rushing to lower interest rates, according to Fed officials who spoke on Tuesday.

A “real risk” of reducing rates prematurely and locking in too-high inflation was mentioned by San Francisco Fed President Mary Daly. Loretta Mester, president of the Federal Reserve Bank of Cleveland, expressed her continued confidence in the central bank’s ability to decrease rates this year. She mentioned that the easing might begin at the June policy meeting, contingent upon favorable economic statistics.

Investors can’t wait for Friday’s non-farm payrolls data out of the United States.

The total number of shares traded on U.S. exchanges was 11.12 billion, which is lower than the average session volume of 11.87 billion for the past 20 trading days.
The number of issues that went down surpassed the number of issues that went up on the NYSE by a margin of 2.86 to 1; on the Nasdaq, the ratio was 2.63 to 1.

While the Nasdaq Composite saw 124 new lows and 53 new highs, the S&P 500 saw four new lows and 24 new 52-week highs.

Rajesh Sharma

Rajesh Sharma

Rajesh Sharma is Correspondent for Stock Market of South East Asia based in Mumbai. He has been covering Asian markets for more than 5 years.