Market Performance:
- Stocks retreated in early Monday trading as treasury yields rose.
- The 30-year Treasury yield climbed above 5% for the first time since late 2023 and the 10-year yield topped 4.5%.
- Investors are digesting Moody’s downgrade of the U.S. credit rating last week from Aaa to Aa1.
- Market breadth improved last week, with 76% of S&P 500 stocks trading above their 50-day moving averages as of midday Friday.
Economic Takeaways:
Last week’s downgrade of US credit by Moody sent stocks lower to start the trading week.
Morgan Stanley chief investment officer Mike Wilson pointed out that Moody’s outlook on US credit could weigh on bonds, making rising Treasury yields the primary concern for equity investors. And if the 10-year Treasury yield rises above 4.5%, that could cause weakness in the equity market, per Wilson. “We would be buyers of such a dip,” Wilson wrote.
The latest Treasury International Capital (TIC) data showed that as of the end of March, inflows of foreign capital continued to grow. Monthly net inflows amounted to $254 billion in March with investments in Treasury notes up while there was a slight drop in foreign holders of U.S. equities.
Investors are now eager for updated April data. Some analysts blamed April’s Treasury selling on lack of demand associated with overseas anger at U.S. tariffs.
Recent dollar strength suggests U.S. assets still enjoy decent demand.
Tariff worries took center stage again. Treasury Secretary Scott Bessent said the U.S. will impose the high tariffs it threatened last month on countries that don’t negotiate in “good faith,” Reuters reported.
Several Fed speakers are on deck to speak on Tuesday and Wednesday after Atlanta Fed President Raphael Bostic said Friday he expects just one rate cut this year and that inflation isn’t falling as fast as the Fed had hoped. Walmart’s announcement last week on price increases due to tariffs is a reminder that inflation is still a top concern.
Citigroup CEO Jane Fraser wrote in a blog post on Friday: “We are entering a new phase of globalization — one less defined by cooperation, and more by strategic self-interest,” Fraser wrote. “Long-held assumptions are being challenged, not just by tariff announcements but by a deeper confidence shock. The near-term impact is already being felt, and the long-term trajectory is being rewritten in real time.”
Odds of a near-term Fed rate cut look dim, with chances for a June trim under 9%, according to the CME FedWatch Tool. July rate cut odds are roughly 34%. The futures market projects the strongest likelihood of two 2025 rate cuts.
Earnings reports expected tomorrow will come from Home Depot, Palo Alto Networks and Toll Brothers.
Top Gainers:
Sable Offshore Corp. (SOC)
ZoomInfo Technologies (ZI)
BGC Group, Inc. (BGC)
UnitedHealth Group (UNH)
Banco BBVA Argentina (BBAR)
Moderna, Inc. (MRNA)
Dollar General Corp. (DG)
Top Losers:
Archer Aviation (ACHR)
Regencell Biosciences (RGC)
Sunrun, Inc. (RUN)
First Solar, Inc. (FSLR)
Pony AI, Inc. (PONY)
SoundHound AI, Inc. (SOUN)
iQSTEL, Inc. (IQST)
Notables:
- Tech stocks that largely led the market’s rally last week were retracing on Monday. This includes Palantir (PLTR), down more than 4%, AppLovin (APP) down 3.7%, Super Micro Computer (SMCI), down 3.7%, and Nvidia (NVDA), down 2.7%.
- Nvidia (NVDA) stock traded flat Monday as market turmoil pressured shares of chipmakers, overshadowing AI chip news during the Computex Taipei tech expo. The company announced over the weekend it’s opening its AI server platform to rival chip makers according to a Barron’s report.
- UnitedHealth (UNH) moved higher 5% early Monday despite not much fresh news. Shares may be getting a lift from media reports of insider buying.
- Novavax (NVAX) stock shot up more than 16% premarket on Monday after the company finally received FDA approval for its COVID-19 vaccine, though only under some conditions.
- Tesla (TSLA) shares retreated in Monday morning trading nearly 4%. Sales in Europe fell recently and now investors are waiting for China sales numbers.
- JPMorgan Chase (JPM) fell nearly 1% in pre-market trading. Monday is the company’s investor day where it reiterated previous guidance for full-year net-interest income.
- Walmart (WMT) dropped 1.7% in pre-market trading after President Trump said over the weekend that the retailer should eat tariff related price increases.
- Coinbase (COIN) and MicroStrategy (MSTR) both fell more than 2% ahead of the open as the largest cryptocurrency, bitcoin, fell as well as other digital coins. Coinbase became the first and only cryptocurrency platform to see its stock join the S&P 500 index on Monday. “Coinbase joining the S&P 500 means crypto’s here to stay,” Coinbase CEO Brian Armstrong told Yahoo Finance last Wednesday. “It’s going to be in everybody’s 401(k),” he added. “Everyone’s going to have crypto exposure, you know, at least indirectly through Coinbase, which is great. And it’s also a symbol that crypto is updating the financial system.”
- Mitsubishi Motors said on Monday it had decided not to proceed with an investment in Renault’s electric vehicle business Ampere, in a shift in the company’s EV strategy.
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