S&P 500 fades gains as bond yields rise
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Stocks gave up their earlier session gains on Monday as bond yields rose, kicking off a big week filled with a Federal Reserve rate decision, the monthly jobs report, and earnings from more “Magnificent Seven” tech heavyweights.
The S&P 500 (^GSPC) dipped into negative territory after gaining as much as 0.4%, and the tech-heavy Nasdaq Composite (^IXIC) also gave up earlier gains despite Tesla (TSLA) shares surging amid upbeat China news. The Dow Jones Industrial Average (^DJI), which has fewer tech components, rose about 0.1%.
The reversal in the broader markets came after the US Treasury increased its federal borrowing estimate for the current quarter to $243 billion. The yield on the 10-year Treasury (^TNX) climbed to 4.627%.
Stocks were eyeing a return to Friday’s sharp gains, which came as strong earnings from Alphabet (GOOG, GOOGL) and Microsoft (MSFT) boosted optimism for a lasting Big Tech-driven rally. Quarterly reports from Apple (AAPL) and Amazon (AMZN) due this week will put those hopes to the test again, with AI costs and prospects under the microscope.
Among techs, Tesla CEO Elon Musk’s surprise visit to China on Sunday brought immediate benefits for the EV maker, which cleared two big barriers to rolling out its Full Self-Driving software in the country. Tesla shares rose more than 11% after it reached an FSD-linked deal with Baidu (BIDU) seen as potentially helping stem its sales slump in a huge market. The Chinese internet giant’s US-listed stock was up almost 7%.
At the same time, investors are counting down to the Federal Reserve’s policy decision at the end of its two-day meeting on Wednesday. Confusion reigns over whether the cooling in inflation has stalled and what any persistence in price pressures implies for interest rate cuts.
While the central bank is expected to hold rates steady at a 23-year high, debate is raging over the timing and even likelihood of a cut in 2024. In focus is whether Fed policymakers will backtrack on their earlier projection for a significant easing in borrowing costs. Traders have already scaled back their bets, and the April jobs report that rounds off the week could move the needle again.
In big individual movers on Monday, Philips (PHG) US-listed shares rocketed up over 33% after the medical device maker said it had agreed to a $1.1 billion deal to settle claims linked to a breathing device recall. The settlement was significantly lower than expected.
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