Quiver Quantitative - Wall Street indexes retreated on Wednesday as concerns around the timing and scale of the Federal Reserve's interest rate cuts pushed Treasury yields higher and pressured stocks. Megacaps Microsoft (NASDAQ:MSFT) (MSFT), Alphabet (NASDAQ:GOOGL) (GOOGL), and Meta (NASDAQ:META) (META) dipped between 0.3% and 0.6% as U.S. bond yields across the board rose to near four-week highs after Tuesday's unexpectedly strong consumer confidence data. The Dow (DIA) led declines, falling to its lowest in nearly one month, and all major S&P 500 (SPY (NYSE:SPY)) subsectors were in the red in early trading.
Conflicting expectations on the size and timing of interest rates have kept the market on edge since the start of this year. Traders began the year expecting cuts by March, but sticky inflation and hawkish comments from central bankers have dampened expectations to a 25 basis points cut only by November or December, as per the CME (CME) FedWatch Tool. "The Fed is in a conundrum, with strong growth numbers and yet, inflation does not seem to be responding to anything," said Robert Pavlik, senior portfolio manager at Dakota Wealth Management.
Market Overview:
- Wall Street indexes retreated amid concerns about the Federal Reserve's interest rate cuts.
- Treasury yields rose to near four-week highs after strong consumer confidence data.
- The Dow fell to its lowest in nearly a month, with all major S&P 500 subsectors in the red.
- Megacaps Microsoft, Alphabet, and Meta dipped as bond yields increased.
- Conflicting expectations on the size and timing of interest rate cuts have kept the market volatile.
- Traders' expectations shifted from cuts by March to only a 25 basis points cut by November or December.
- Market participants will closely monitor the Federal Reserve's Beige Book for economic insights.
- Comments from Fed policymakers and the release of April's Personal Consumption Expenditure data are key focuses.
- Investors remain cautious about potential volatility from upcoming economic data releases.
The tech-heavy Nasdaq (QQQ) retreated after closing above the 17,000 mark for the first time on Tuesday. Chip stocks, which drove gains in the last session, were down 1.9%. Small-cap stocks also came under pressure, with the Russell 2000 losing 1.3%. The CBOE Volatility Index, a Wall Street fear gauge, hit its highest levels since May 3. The central bank's Beige Book, due at 2:00 p.m. ET on Wednesday, is expected to throw light on the state of the U.S. economy.
Marathon Oil (NYSE:MRO) (MRO) advanced 8.68% after ConocoPhillips (NYSE:COP) (COP) said it would buy the company in an all-stock deal for a little over its $15 billion market value. ConocoPhillips lost 2.9%. Airline stocks fell, led by American Airlines (NASDAQ:AAL) (AAL), which declined 13.0% after the company cut its second-quarter profit forecast. An index tracking airline stocks dropped 4.4%. DICK'S Sporting Goods (DKS) jumped 15.6% after lifting forecasts for annual sales and profit, while Abercrombie & Fitch (ANF) rose 16.1% after raising its annual sales growth forecast.
This article was originally published on Quiver Quantitative