Nasdaq 100, Dow Jones, S&P 500 News: Wall Street Rebounds Despite Rising Yields

Interest Rate Speculation Amid Economic Strength

The U.S. stock market presents a mixed outlook on Monday as the S&P 500 and Nasdaq struggle for direction in response to rising Treasury yields. These movements reflect growing trader speculation regarding the Federal Reserve’s potential delay in interest-rate cuts.

The background to this sentiment is a string of positive economic reports, including robust manufacturing and jobs data, suggesting a resilient economy. This reduces the urgency for the Fed to lower interest rates. According to the CME FedWatch Tool, there’s now about a 51% chance of the Fed announcing its first rate cut in June, a decline from 58% at the start of the previous week.

At 14:36 GMT, the Dow Jones Industrial Average is trading 38978.03, up 73.99 or +0.19%. The S&P 500 Index is at 5216.85, up 12.51 or +0.24% and the Nasdaq-100 index is trading 16312.91, up 64.39 or +0.40%.

Treasury Yield Trends and Equity Markets

The yield on 10-year Treasury notes has risen, reaching its highest point since the previous November, exerting pressure on equity markets. This uptick in yields is a reaction to the stronger-than-expected economic indicators, leading to a shift in market expectations regarding the Fed’s rate cut timeline. Investors are also adjusting their forecasts for the number of rate cuts this year, with the market now less inclined to expect more than three reductions.

Sector Performances and Stock Highlights

Notably, technology and cryptocurrency stocks have displayed significant activity. Tesla shares climbed 4.6% following Elon Musk’s announcement about the Robotaxi, set to be unveiled in August. Cryptocurrency-related stocks, such as Coinbase Global, Marathon Digital, and MicroStrategy, also saw substantial gains, driven by an uptick in bitcoin prices. Wells Fargo raised its year-end target for the S&P 500 to 5,535, marking the highest prediction among Wall Street brokerages, which may indicate underlying confidence in market resilience despite prevailing uncertainties.

Looking Ahead: Economic Indicators and Fed Decisions

Market focus now shifts to the March reading of the U.S. Consumer Price Index (CPI) and the release of minutes from the Fed’s latest meeting. These documents are anticipated to provide crucial insights into inflation trends and the central bank’s policy outlook. Comments from Federal Reserve officials like Austan Goolsbee and Neel Kashkari are also awaited for further policy cues.

Short-term Market Outlook

Considering the interplay of rising Treasury yields, resilient economic indicators, and varying sector performances, the short-term market outlook is cautiously optimistic. This perspective hinges on the upcoming CPI data and Fed communications, which will be pivotal in shaping investor sentiment and guiding market directions in the near term.

The strength of the U.S. economy, coupled with anticipated Fed policy adjustments, suggests a cautiously bullish stance for U.S. equities. However, investors should be prepared for volatility following the release of the CPI report.

Technical Analysis

E-mini S&P 500 Index futures are edging higher but still in a weak position after crossing to the bearish side of the long-term rising wedge formation late last week.

The nearest resistance is 5305.75. This uptrending line is likely to act like a pivot this week.

On the downside, the sellers are eyeing the 50-day moving average at 5159.97. Look for a technical bounce on the first test of this trend indicator. However, if it fails as support then look for the start of an acceleration to the downside.