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Major U.S. stock indexes traded in the red on Tuesday, weighed down by tech and semiconductor stocks, as growth falters while Wall Street ponders possible interest rate policy occurred in a calmer banking context.
Nasdaq Composite (COMP.IND) decline 0.7%S&P 500 (SP500) fall 0.3%and the Dow Jones Industrial Average (DJI) slip 0.2%.
“Sobriety seems to prevail, at least so far this week, with no concerns of new contagion affecting sentiment,” ING said. “Real volatility in interest rates remains elevated, with double-digit movements in basis points across the 2Y-10Y segment of the major developed market curves on Monday. reflected in the still-high implied swap volatility, honoring lower bank worries but yield anxiety worries over inflation.”
The yield on the 10-year Treasury note (US10Y) rose 3 basis points to 3.56% and the 2-year yield (US2Y) increased by 5 basis points to 4.06%.
The market is currently divided on the outcome of the Federal Reserve meeting in May. Fed funds futures are pricing in a near 50/50 chance between no gain and a 25 basis point increase.
“There is no banking outbreak news that would allow rates to rise again but we suspect more than one Fed rate hike could be priced in the curve,” ING said. 2Y hovers around the 4% yield.
“This level has proven to be a magnet since the SVB crisis and a decisive break below would require a valuation curve higher than the three 25 bp cuts we forecast for this year and the Curve is currently pricing in,” it added. “This is not impossible, but this will require data to keep pace with the economic gloom in the market, or the banking contagion.”
James Bullard, president of St. Louis Fed, said monetary policy could continue to take pressure to reduce inflationwhile “appropriate macroprudential policy can curb financial stress in the current environment.”
Senate Banking Committee hearings on recent banking failures ended early in the day, in which FDIC Chairman Martin Gruenberg, Fed Vice Chairman Michael Barr and Under Secretary of the Treasury Nellie Liang agreed that rules should be strengthened to prevent a bank failure.
Turning to economic data, the Conference Board’s measure of consumer confidence in March unexpectedly strong. Kieran Clancy of Pantheon Macroeconomics said: “We were surprised that the index rose, despite the SVB debacle and the ensuing turmoil in the markets. “Respondents assume that the consequences of a bank failure are short-lived. That is false; credit conditions are set to tighten significantly, which increases dramatically. possibility of the economy falling into recession by the end of the year.”
Meanwhile, wholesale inventory drift in february, while retail inventory move higher. The The case of S&P Shiller The home price index fell for the seventh consecutive month.
Among active stocks, chipmakers lower edge before Micron Technology (MU) reported earnings, trailing both the S&P 500 and Nasdaq indexes.
McCormick (MKC) led gains on the S&P 500 after post an income beatwhile Walgreens (WBA) is the top gainer on the following Dow Better than expected results. Among those who refused, Lucid Motors (LCID) fell 7% as the electric vehicle maker planning to lay off.
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