Stock market today: US stocks turn lower ahead of CPI inflation data

Stock market today: US stocks turn lower ahead of CPI inflation data

US stocks turned lower on Tuesday as investors bide their time until a key inflation report lands and potentially sheds light on the path of interest rates.

By mid-morning trading, all three major indexes reversed earlier session gains. The Dow Jones Industrial Average (^DJI) led the move to the downside, falling about 0.7%, or more than 250 points. The benchmark S&P 500 (^GSPC) dropped about 0.6%, while the tech-heavy Nasdaq Composite (^IXIC) slipped roughly 0.3%.

Stocks have become marooned ahead of the release of the Consumer Price Index on Wednesday, seen as a pivotal point for a market facing a slower next leg higher after a strong first quarter.

Investors have become increasingly less convinced the Federal Reserve will deliver on the three rate cuts it has projected for this year, given the persistent show of strength in the US economy. That has intensified the focus on the CPI print for March, and any sign that inflation has begun to cool again will be seen as an invitation for a June policy shift.

Meanwhile, fading rate-cut hopes have helped push up the 10-year Treasury (^TNX) yield near five-month highs — another potential headwind for stocks, with the 5% level seen as the key point of concern. The benchmark yield slipped about 5 basis points on Tuesday to trade around 4.4%.

At the same time, rising metals prices have sparked concerns about a feed-through effect on inflation. Copper (HG=F), a key industrial input, put on about 0.7% early Tuesday, adding to a 10% year to date gain that has prompted talk of a new bull market. Gold (GC=F) climbed above $2,380 an ounce, extending its rally to hit another fresh record.

Another catalyst on the horizon is the start of first quarter earnings season, which gets underway in earnest on Friday with results from the likes of Citigroup (C), JPMorgan (JPM), and Wells Fargo (WFC).

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  • Stocks reverse earlier gains

    All three major indexes reversed earlier session gains on Tuesday — just ahead of Wednesday’s critical CPI report.

    The Dow Jones Industrial Average (^DJI) led the move to the downside, falling about 0.7%, or more than 250 points. The benchmark S&P 500 (^GSPC) dropped about 0.6%, while the tech-heavy Nasdaq Composite (^IXIC) slipped roughly 0.3%.

  • Could no rate cuts be on the table?

    Markets are anticipating just two and a half 25 basis point cuts this year, down from the six cuts expected at the start of the year, according to Bloomberg data.

    As investors weigh recent Fed speak and adopt a “higher for longer” interest rate mentality, a key question has emerged: Does the US economy even need rate cuts?

    “[The Fed] wants to cut rates, but the economy is standing in its way,” Mizuho Securities USA chief economist Steven Ricchiuto told Yahoo Finance Live early Tuesday. “The Fed is fighting the economy. In particular, they’re fighting the American consumers, and that’s a fight that I would not want to get involved in.”

    Ricchiuto, who does not expect the central bank to cut interest rates this year, added there are certain risks to the upside if interest rates remain unchanged.

    “If the Federal Reserve was to cut interest rates without the data justifying it, then you could get into an environment where you begin to embed a 3% inflation psychology into the marketplace as opposed to a 2% inflation psychology,” he explained. “That laterally shifts up the fair value trading range of the 10-year note.”

    The 10-year Treasury (^TNX) yield is currently hovering near five-month highs, with the 5% level seen as the key point of concern.

    If Treasury yields rise, “that’s a real problem in terms of the outlook for the overall economy because clearly, that will have significant negative effects on the ability of households to purchase homes,” Ricchiuto argued.

  • US stocks rise as investors await critical inflation data

    US stocks climbed higher on Tuesday as investors await key CPI data, due Wednesday morning.

    The benchmark S&P 500 (^GSPC) climbed about 0.4%, while the tech-heavy Nasdaq Composite (IXIC) jumped roughly 0.5%. The Dow Jones Industrial Average (^DJI) added about 0.1%, or roughly 50 points.

    Meanwhile, fading rate-cut hopes have helped push up the 10-year Treasury (^TNX) yield near five-month highs. The benchmark yield slipped about 3 basis points on Tuesday to trade around 4.4%.

  • Teens clamp down on spending, but not everywhere

    Teens are tightening up their spending, according to Piper Sandler’s latest ‘Taking Stock’ research out this morning.

    The spring survey showed that teen “self-reported” spending fell 6% year over year to $2,263, and rose only by 1% from the fall.

    The biggest category winner is cosmetics.

    Spending on beauty hit the highest level since spring 2018, interesting in the sense that Ulta (ULTA) CEO David Kimbell warned last week of an industry slowdown (his stock price was clobbered). E.l.f. Beauty (ELF) gained the most market share relative to its competitors, the survey showed.

    Teens clamp down on their spending.

    Teens clamp down on their spending. (Piper Sandler)

  • The PC recovery continues

    Keep an eye on shares of PC makers Dell (DELL) and HP Inc. (HP) today.

    PC industry firm Canalys said Tuesday that total shipments of desktops and notebooks grew 3.2% annually to 57.2 million units in the first quarter. The research outfit says this is a sign of demand building ahead of catalysts coming later this year, such as the arrival of AI PCs and the Windows 11 refresh.

    “Growth in the first quarter of 2024 bodes well for a strong PC market throughout the year,” said Ishan Dutt, principal analyst at Canalys. “Vendors and the channel have been working through some final stages of inventory corrections, and macroeconomic conditions in certain markets continue to limit demand. But the strength of the refresh opportunity, particularly from businesses, is beginning to come to the fore. The market is set to go from strength to strength in the coming quarters as customers prioritize upgrades in preparation for a large-scale transition to Windows 11.”

    The PC recovery continues on.

    The PC recovery continues on. (Canalys)