US stocks decline ahead of CPI inflation data

US stocks fell on Tuesday as investors bide their time until a headline inflation report is released and may shed light on the path of interest rates.

By mid-morning trading, all three major indexes had reversed the previous session's gains. The Dow Jones Industrial Average (^DJI) led the downward trend, falling about 0.7%, or more than 250 points. The S&P 500 (^GSPC) fell about 0.6%, while the Nasdaq Composite (^IXIC) fell about 0.3%.

Stocks are deserted ahead of Wednesday's CPI release, which is seen as a pivotal point for a market facing a slower rise after a strong first quarter.

Investors are becoming increasingly less convinced that the Federal Reserve will implement the three interest rate cuts it expects for this year, given the ongoing show of strength in the US economy. This has intensified focus on the March CPI reading, and any sign that inflation is starting to slow again will be seen as a call for a policy change in June.

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

At the same time, rising metal prices have raised concerns about its impact on inflation. The price of copper (HG=F), a key industrial input, rose 0.7% early Tuesday, adding to a 10% year-to-date gain and sparking talk of a new bull market. Gold (GC=F) rose above $2,380 per ounce, extending its rise to reach another new record high.

Another catalyst on the horizon is the start of Q1 earnings season, which begins in earnest on Friday with results from the likes of Citigroup (C), JPMorgan (JPM), and Wells Fargo (WFC).

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He lives5 updates

  • Stocks reverse previous gains

    All three major indexes reversed the previous session's gains on Tuesday – ahead of Wednesday's important CPI report.

    The Dow Jones Industrial Average (^DJI) led the downward trend, falling about 0.7%, or more than 250 points. The S&P 500 (^GSPC) fell about 0.6%, while the Nasdaq Composite (^IXIC) fell about 0.3%.

  • Couldn't interest rate cuts be on the table?

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

    As investors ponder the Fed's recent comments and adopt a “higher interest rates for longer” mentality, a key question has emerged: Does the US economy need to lower interest rates?

    “[The Fed] “He wants to cut interest rates, but the economy is getting in the way,” Stephen Ricciuto, chief economist at Mizuho Securities USA, told Yahoo Finance Live early Tuesday. In particular, they are fighting American consumers, and that is a fight I do not want to be involved in.”

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

    “If the Fed cuts rates without there being data to justify it, you can get into an environment where you start incorporating the psychology of 3% inflation into the market instead of the psychology of 2% inflation,” he explained. “This sideways raises the fair value trading range for 10-year bonds.”

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

    If Treasury yields rise, “that's a real problem in terms of the macroeconomic outlook because obviously that would have significant negative impacts on the ability of households to buy homes,” Ricciuto said.

  • US stocks rise as investors await crucial inflation data

    US stocks rose on Tuesday as investors awaited key CPI data on Wednesday morning.

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

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

  • Teens are clamping down on spending, but not everywhere

    Teens are tightening up their spending, according to the latest 'assessment' research released by Piper Sandler this morning.

    The spring survey showed that teens' “self-reported” spending fell 6% year over year to $2,263, and has risen only 1% since the fall.

    The biggest winner in the category is cosmetics.

    Beauty spending is at the highest level since the spring of 2018, which is interesting in the sense that Ulta (ULTA) CEO David Kimball warned last week of an industry slowdown (its stock price has taken a nosedive). The survey showed that Elf Beauty (ELF) had the largest market share compared to its competitors.

    Teenagers put pressure on their spending.Teenagers put pressure on their spending.

    Teenagers put pressure on their spending. (Piper Sandler)

  • The computer continues to recover

    Keep an eye on stocks of computer makers Dell (DELL) and HP Inc. (HP) today.

    PC maker Canalys said Tuesday that total shipments of desktop and laptop computers It grew 3.2% annually to 57.2 million units In the first quarter. The research team says this is a sign of building demand ahead of upcoming catalysts later this year, such as the arrival of AI-powered PCs and the Windows 11 operating system update.

    “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 of the final stages of inventory corrections, and macroeconomic conditions in some markets continue to limit demand. But the strength of the opportunity to upgrade, especially from corporates, is beginning to emerge. The market is expected to go from strength to strength in the coming quarters.” “Customers are prioritizing upgrades in preparation for a large-scale migration to Windows 11.”

    The computer continues to recover.The computer continues to recover.

    The computer continues to recover. (Canalys)

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