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Stock market today: Dow snaps 6-day losing streak, Powell warns on inflation

The Dow snapped a six-day losing streak on Tuesday as investors digested a "higher-for-longer" interest rate mantra from the Federal Reserve.

The Dow Jones Industrial Average (^DJI) finished the day up 0.2%, or more than 50 points, following comments from Federal Reserve chair Jerome Powell, who said it will likely take "longer than expected" for the central bank to be confident in its inflation fight.

The S&P 500 (^GSPC) and tech-heavy Nasdaq Composite (^IXIC) closed down 0.2% and 0.1%, respectively, after seesawing throughout the trading day.

The moves come as bond yields remain at multi-month highs, coupled with rising tensions in the Middle East following Iran's weekend attacks on Israel.

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Yields jumped on the heels of Powell's comments with the 2-year note briefly touching above 5% — its highest level since November. The benchmark 10-year Treasury yield (^TNX), which touched 2024 highs on Monday, climbed about 3 basis points to trade around 4.66% on Tuesday.

Meanwhile, earnings reports flooded in before the bell. UnitedHealth (UNH) shares added about 5% after the healthcare group beat quarterly profit estimates, even as it said it expects to take a $1.6 billion hit from a February cyberattack.

Investors were also digesting more big bank results: Bank of America (BAC) reported that first quarter profit dropped 18% year over year as a key revenue source weakened, while Morgan Stanley (MS) stock rose as it topped expectations. Elsewhere, BNY Mellon (BK) posted a profit beat while Johnson & Johnson (JNJ) reported a revenue miss.

LIVE COVERAGE IS OVER16 updates
  • United Airlines jumps after reporting narrower loss, strong guidance

    Shares of United Airlines (UAL) jumped more than 5% in after-hours trading on Tuesday after the airliner posted first-quarter results that beat Wall Street expectations.

    UAL posted an adjusted loss of $0.15 a share compared to the $0.57 loss analysts compiled by Bloomberg had expected. Operating revenue of $12.54 billion also beat estimates of $12.44 billion.

    The company guided to stronger-than-expected earnings for the current quarter, forecasting adjusted EPS of $3.75 to $4.25, topping expectations of $3.73.

    Notably, United posted a net loss of $124 million in the first quarter following the three-week grounding of all Boeing 737 Max 9s after a door plug blew off an Alaska Airlines Max jetliner earlier this year. Boeing (BA) is currently undergoing a federal safety review.

  • Dow snaps six-day losing streak

    The Dow snapped a six-day losing streak on Tuesday as investors digested a "higher-for-longer" interest rate mantra from the Federal Reserve.

    The Dow Jones Industrial Average (^DJI) finished the day up 0.2%, or more than 50 points, following comments from Federal Reserve chair Jerome Powell, who said it will likely take "longer than expected" for the central bank to be confident in its inflation fight.

    Both the S&P 500 (^GSPC) and tech-heavy Nasdaq Composite (^IXIC) closed down 0.2% and 0.1%, respectively, after seesawing throughout the trading day.

  • The S&P 500's recent pullback is normal, strategist reminds investors

    Stocks rose in what felt like a straight-line for the first three months of 2024, with the S&P 500 (^GSPC) notching its best first quarter return in five years.

    Since, the start of April it's been a different story. Friday and Monday’s market action brought the largest two day-decline in the S&P 500, 2.6%, in more than year.

    Truist Co-CIO Keith Lerner pointed out in a note to clients on Monday night that the pullback seen recently in the market is to be expected in any given year.

    “Periodic pullbacks are the admission price to the market,” Lerner wrote.

    The S&P 500's 4% intra-year fall in 2024 is still a far cry from the average 14% drawdown seen over the last forty years, per Lerner's analysis. And given this, the market's current direction could get worse before it gets better.

    “Our view remains that the primary stock market trend remains positive,” Lerner wrote. “We continue to expect a bumpier path forward relative to the abnormally-smooth first quarter ride.”

  • 'Interest rate volatility' could hit homebuilder forecasts this earnings season: UBS

    Uncertainty over when the Fed will raise interest rates could hit homebuilders' outlooks in the upcoming earnings season, according to UBS analysts.

    “We expect solid 1Q homebuilder financial results, with upbeat industry demand commentary from management teams, consistent with Lennar (LEN) and KB Home (KBH),” John Lovallo, UBS analyst, wrote in a note to clients Tuesday morning. But he noted that "interest rate volatility/uncertainty remains heightened, exacerbated by last week's CPI, which could result in conservative homebuilder gross margin outlooks."

    Builders have been offering incentives like mortgage rate buydowns to sell homes in the high interest rate environment. Such deal sweeteners while effective hurt profit margins.

    The 30-year fixed mortgage rate has been hovering around 7% in recent weeks, a far cry from the below-5% rates that many homeowners are locked into already. That has kept more buyers and sellers on the sidelines.

    The prospect of the Federal Reserve’s rate cut looks murkier following recent higher than expected inflation prints, a factor likely to pressure builder stocks near term.

    As a result, UBS has been “ more cautious than consensus on '24/'25 homebuilding gross margins, although Street forecasts seem to have moderated to some extent,” Lovallo noted.

    DR Horton (DHI), the largest builder by market cap, is expected to report earnings before the market opens on Thursday.

  • Powell: Will take 'longer than expected' to reach confidence on inflation

    Federal Reserve chair Jerome Powell said Tuesday it will likely take "longer than expected" for the central bank to be confident in its inflation fight, citing a "lack of further progress" this year when it comes to bringing inflation back down to the Fed's 2% target.

    Powell, who noted the US economy over the past year has been "quite strong," pointed to hotter-than-expected inflation data over the past three months.

    “The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence," he said during a fireside chat with Bank of Canada Governor Tiff Macklem in DC.

    The central bank leader suggested a higher-for-longer policy stance is here to stay, adding, "We can maintain the current level of restriction for as long as needed."

    Yields jumped on the heels of his comments with the 2-year note briefly touching above 5% — its highest level since November. The 10-year Treasury yield (^TNX), which touched 2024 highs on Monday, climbed about 6 basis points to trade around 4.69%.

    In equities, the benchmark S&P 500 reversed earlier gains while the Dow held positive.

    FILE PHOTO: Federal Reserve Chair Jerome Powell testifies before a Senate Banking, Housing, and Urban Affairs Committee hearing on Capitol Hill in Washington, U.S., March 7, 2024. REUTERS/Tom Brenner/File Photo
    FILE PHOTO: Federal Reserve Chair Jerome Powell testifies before a Senate Banking, Housing, and Urban Affairs Committee hearing on Capitol Hill in Washington, U.S., March 7, 2024. REUTERS/Tom Brenner/File Photo (REUTERS / Reuters)
  • It's time to start paying attention to the Vix

    Higher for longer interest rate angst, coupled with greater geopolitical risks, are beginning to show up in markets.

    The Cboe Volatility Index (^VIX), otherwise known as Wall Street's "fear gauge," closed above 19 for the first time since Halloween on Monday. The index continued to hover at those levels on Tuesday.

    Citi's equity strategist Stuart Kaiser said the moves point to "localized signs of stress" in the market as rising yields continue to pressure stocks while investors also digest escalating tensions in the Middle East.

    Fundstrat head of research Tom Lee said the surging Vix means investors don't believe the worst is priced into stocks and to be extra cautious when buying any dip.

    "Investors are de-risking," he said in a video to subscribers uploaded early Tuesday. "We're in the danger part but it does increase opportunity. Ultimately, the Vix says to move slow here. Maybe extra slowly."

  • The gold calls continue on the Street

    Citi is out today with a $3,000 an ounce gold call, which could very well fuel more sales of gold bars at Costco (COST)!

    Deutsche Bank is being slightly more measured today, forecasting $2,400 an ounce for gold by year end and $2,600 an ounce by December 2025. Gold prices currently stand around $2,400 an ounce.

    A couple things from their note that caught my attention:

    On potential buying if gold prices pullback: "We think gold is likely to remain on a strong footing as any profit-taking by early investors would be replaced by investment from those who have so far not participated in the move, but agree philosophically with its direction."

    On the Fed's influence on gold: "From an inflation and monetary policy standpoint, gold's strength stems from the ability to 'have it both ways' whereby inflation remains a significant concern, but at the same time, the FOMC judges rates as sufficiently restrictive and, hence, the next move (however much delayed) remains a cut."

  • Dow edges higher

    The Dow Jones Industrial Average (^DJI) edged higher in afternoon trading on Tuesday, up about 0.5%, as the index looked to snap a six-day losing streak.

    Both the S&P 500 (^GSPC) and tech-heavy Nasdaq Composite (^IXIC) reversed earlier losses to trade mostly flat.

    Meanwhile, bond yields remain at multi-month highs, with the 10-year Treasury yield (^TNX) climbing about 4 basis points to trade around 4.66%.

  • Trump Media stock tanks... again

    Trump Media & Technology Group (DJT), the parent company of Donald Trump's social media platform Truth Social, fell about 12% on Tuesday after the company announced it's launching a new live TV streaming platform.

    According to a press release, Trump Media will launch the live streaming service on phones, tablets, and TV through the Truth Social app.

    "The streaming content is expected to focus on live TV including news networks, religious channels, family-friendly content including films and documentaries; and other content that has been cancelled, is at risk of cancellation, or is being suppressed on other platforms and services," according to the release.

    Trump Media went public on the Nasdaq after merging with special purpose acquisition company Digital World Acquisition Corp. in a deal approved by shareholders late last month. Shares are down more than 60% since the end of March.

    On Monday, the stock tumbled on news the company had filed to issue more than 21 million shares.

    Trump maintains a roughly 60% stake in Truth Social. At current trading levels of about $23.40 a share, Trump Media boasts a market cap of roughly $3.2 billion, giving the former president a stake worth around $1.9 billion. Right after the company's public debut, Trump's stake was worth just over $4.5 billion.

    Read more here.

  • Stocks extend declines, reverse earlier gains

    Stocks extended declines in mid-morning trading on Tuesday after markets initially eyed a broader comeback earlier in the session.

    The Dow Jones Industrial Average (^DJI) hugged the flatline after coming off a six-session run of losses. The S&P 500 (^GSPC) dropped about 0.3% while the tech-heavy Nasdaq Composite (^IXIC) fell roughly 0.2%.

    The moves come as bond yields remain at multi-month highs, coupled with rising tensions in the Middle East following Iran's weekend attacks on Israel.

  • New data shows market for new homes 'starting to show cracks'

    New residential construction, including single-family and multifamily homes, tumbled by the largest amount in four years as rising mortgage rates weaken housing activity.

    Housing starts fell 14.7% month over month in March, dropping from a 1.55 million units annualized pace to 1.32 million units annualized, according to data from the Census Bureau released Tuesday. Single-family starts fell 12.4% month over month.

    According to LPL Financial’s chief economist, Jeffrey Roach, the data indicates how new home construction is "starting to show cracks in the pace of growth."

    “Housing construction is poised to slow as potential homebuyers indicate now is a poor time to buy a home. Investors should expect residential investment becoming a drag on GDP growth in the coming quarters. Housing activity may not fully stabilize until the Fed commences their easing cycle."

    The fresh government data comes after builder sentiment in April was flat from the previous month, breaking four consecutive months of gains. The NAHB said, “Buyers are hesitating until they can better gauge where interest rates are headed.”

    “Looking ahead, we still think single-family starts stand to benefit from the lack of second-hand homes on the market, shifting demand to newbuilds," Thomas Ryan, property economist at Capital Economics, wrote in a note to clients following the release.

    "But that strength will be offset by weakness in multi-family starts, which we expect will remain around current levels, leaving total housing starts little higher than they currently are by the end of this year."

    The SPDR S&P Homebuilders ETF (XHB) was trading lower by more than 1% Tuesday morning.

  • Live Nation falls on antitrust probe report

    Shares of Live Nation (LYV), the parent company of Ticketmaster, fell about 7% early Tuesday after the Wall Street Journal reported the Department of Justice (DOJ) is preparing to file an antitrust lawsuit against the company as soon as next month.

    According to the report, the DOJ will allege that Live Nation has leveraged its dominance in the marketplace to harm competitors. The specific claims the department could allege are unknown at this time.

    The federal government approved the Live Nation-Ticketmaster merger in 2010. Since then, the company has been at the center of antitrust concerns, with critics taking aim at its sky-high ticket fees and accusing the entertainment giant of monopolistic practices and anti-competitive behavior.

    In 2020, the department updated the company's consent decree, an agreement that barred Live Nation from strong-arming venues into using TicketMaster for its tours, and extended it until 2025 after finding evidence the company repeatedly and over the course of several years engaged in conduct that violated its earlier agreement.

    In the face of Tuesday's stock declines, shares are down about 1% since the start of the year.

    Read more here.

  • Stocks eye comeback

    The Dow rose about 200 points on Tuesday as markets eyed a broader comeback to snap a six-day losing streak.

    The Dow Jones Industrial Average (^DJI) climbed around 0.6% while the S&P 500 (^GSPC) hugged the flatline. The tech-heavy Nasdaq Composite (^IXIC) dropped roughly 0.1%.

    Bond yields continued to rise after the 10-year Treasury yield (^TNX) touched 2024 highs on Monday. The yield was up about 4 basis points to trade at around 4.66% early Tuesday.

  • Chatting interest rates and markets with BNY Mellon’s CEO

    I just had a good post-earnings chat with BNY Mellon (BK) CEO Robin Vince. BNY Mellon reported its quarterly results this morning, and the stock is up 2% premarket.

    I appreciated his thoughts on rates and markets (below), and I took them as inflationary!

    “As I think about the path of interest rates, there are a few things that are going on in the world. Clearly, we've got geopolitical risks that are out there, and just today, the potential escalation of the ongoing [Israel/Iran] conflict — that's certainly a risk. We've got consistently, relatively high inflation in the US and that's clearly a bit of a risk. So that brings into some question the path of interest rates. We've got fiscal challenges in the US and the continued [high] amount of issuance of US Treasurys from a volumes point of view. That can be quite good for our business, but as a citizen and a taxpayer, you have to worry a little bit about the path of debt sustainability in the United States. So there's a lot going on.

    “Now, I'll give you the flip side as well because what we see is really strong, underlying underpinnings for the US economy, and it's not to say that we won't have a correction at some point in the stock market — that could well happen. It's not to say we couldn't have a recession at some point. That's kind of inevitable at some point in time. But when you look at the advantages that the US has right now, it's got a lot of significant advantages on a relative basis in the world. It's a great destination for investment. You can hear that from CEOs internationally. You can see it from investors putting their money into the United States, you can see the performance of the stock market, and there are a lot of tailwinds that are coming into the markets right now. So I would say it's a place you have to be prepared for all eventualities. Could we see the Fed stay on hold, maybe. Could we see the Fed cut rates this year? Probably. Could we see the Fed hike rates? Not impossible. You got to be prepared, but at the same time, the underlying direction of travel for the US is pretty positive.”

  • Bring on those Starbucks earnings

    Starbucks (SBUX) earnings will be out in a few weeks, and I have consumed note upon note suggesting the report could be ugly.

    Most of the concern on Starbucks at the moment stems from falling store traffic in the US, in part because prices for what Starbucks sells have gone through the roof. I paid $7 for a venti cold brew at a NYC store a week ago! (I have been cutting back trips to Starbucks.)

    Bernstein is out this morning with a fresh look at store traffic, and it isn't pretty.

    Starbucks shares year to date: -11.3%.

    The ice cold traffic trend at Starbucks.
    The ice cold traffic trend at Starbucks. (Bernstein)
  • Markets quote of the morning....

    Stock futures have been all over the map this morning after Monday's hot retail sales report drove a drubbing.

    The indecision on the part of investors comes as they are still clinging to hopes of a June interest rate cut, which seems unlikely given how the macro data has trended in April.

    I think JPMorgan's strategy team offers up a good blunt take on markets this morning as if to level-set investors:

    "For a market reliant on immaculate disinflation, a dovish Fed reaction function, and diminishing tail risks on growth, the continuation of hot growth and inflation data can bring us to a tipping point where a tighter stock vee bond risk premium finally produces a market correction. Inflation risks are also compounded by upside risks to oil due to geopolitical developments related to Russia and risk of further escalation in the Middle East. Additionally, investor positioning is elevated, with cash allocations at historical lows."