Bond yields fall and stock prices end mixed on weak U.S. economic news


  • The stock market closed on Wednesday mixed
  • The stock market fell today
  • Employment increased
  •  Global bond prices decreased
  • In the markets today
  • All over the market

Wednesday saw declines for the S&P 500 Index ($SPX) (SPY), the Dow Jones Industrials Index ($DOWI) (DIA), and the Nasdaq 100 Index ($IUXX) (QQQ).

The stock market closed on Wednesday mixed

Wednesday's stock market closings were a mixed bag. As weaker-than-anticipated U.S. economic data on March ADP employment and March PMI services activity stoked fears of an economic slowdown, the wider market drifted modestly lower. Technology stocks fell as a whole as chipmakers struggled after Japan joined the United States and the Netherlands in limiting shipments of chipmaking gear to China. The Dow Jones Industrials would have ended the day in the red if not for Johnson & Johnson's increase of more than +4%.

The stock market fell today

Wednesday's stock market decline was due to worries that the global economy may stagnate as central banks across the globe keep increasing interest rates. Wednesday's increase of 50 basis points (bp) in the benchmark interest rate by the Reserve Bank of New Zealand was double what economists had predicted. Moreover, Vujcic, a member of the European Governing Council, has said that "additional interest rate rises" are to be anticipated if core inflation in the Eurozone continues to trend above 4%. Mester, president of the Cleveland Fed, said on Tuesday night that monetary policy needs to move "somewhat further into restrictive territory this year," with the fed funds rate rising above 5% and the real fed funds rate remaining in positive territory for some time, in order to put inflation on a steady path down to 2%.

Employment increased

Employment in the United States increased by +145,000 according to ADP in March, which was below the +210,000 predicted.

The U.S. March ISM services index dropped -3.9 points to 51.2, below economists' predictions of 54.4.

The U.S. trade deficit in February widened to -$70.5 billion, the largest in four months and worse than expected; this bodes poorly for GDP growth in the first quarter.

 Global bond prices decreased

Weaker-than-expected March ADP employment and March ISM services surveys showed weakness in the U.S. economy, and on Wednesday, bond rates throughout the world dropped as a result. Yield on 10-year Treasury notes hit a six and a half month low of 3.263% and closed the day down -4.9 basis points at 3.290%. The yield on the 10-year German bund hit a new low of 2.164%, down -6.7 bp from its previous closing at 2.182%. UK 10-year gilt yields decreased by -0.6 basis points to 3.428%.

Wednesday, stock markets throughout the world closed with losses. The ESX 50 Index ended the day down -0.39%. China's Shanghai Composite Stock Index was closed due to a vacation, while Japan's Nikkei Stock Index declined by -1.68%.

In the markets today

Wednesday, Japan followed the United States and the Netherlands in limiting shipments of chipmaking equipment to China, putting pressure on chipmakers. The outcome was a greater than 3% drop in share price for Advanced Micro Devices (AMD) and Globalfoundries (GFS). Applied Materials (AMAT), Lam Research (LRCX), and Nvidia (NVDA) also lost more than 2% at market close.

As Citigroup reported that MarketAxess Holdings' (MKTX) March monthly volume numbers were "a little mixed compared to our expectations," the stock price of MKTX plummeted more than 13%, making it the S&P 500's worst performer.

As Bank of America lowered Albemarle (ALB) to underperform from neutral, the stock price dropped more than 6% at market close.

Class-8 truck orders, a major indicator of demand in the trucking business, dropped -11.6% year-over-year in March, sending shares of Cummins (CMI) down by more than -3% at the market's closing. The announcement caused losses of 6% for Deere (DE) and 3% for Paccar (PCAR).

Although the ADP employment report for March showed a smaller increase than anticipated, staffing service stocks slumped on Wednesday as a result. Therefore, shares of Ceridian HCM Holding (CDAY) and Robert Half International (RHI) both ended the day down by more than -3% and -4%, respectively.

Analysts were dissatisfied that Western Alliance Bank (WAL) did not provide a specific deposit balance at its quarter-end report, and the stock price dropped more than 12% as a result.

After agreeing to pay $8.9 billion to settle all cancer cases connected to its talc-based powders, Johnson & Johnson (JNJ) finished up more than +4%, leading gainers on the S&P 500 and Dow Jones Industrials.

On Wednesday, investors bought utility equities as a hedge against the weakening economy. Nasdaq 100 gainers were led by Xcel Energy's (XEL) +3.06% gain at market closing. In addition, American Electric Power (AEP), Evergy (EVRG), Eversource Energy (ES), Alliant Energy (LNT), WEC Energy (WEC), Entergy (ETR), FirstEnergy (FE), Exelon (EXC), NiSource (NI), and Duke Energy (DUKE) ended the day with gains more than +2%.

After Raymond James's upgrade to strong buy, shares of UnitedHealth Group (UNH) and Cigna Group (CI) both jumped by more than 3% at market close.

UBS upgraded Sealed Air Corp (SEE) to a buy with a $59 price objective, and the stock ended the day up more than 2%.

All over the market

On Wednesday, June 10-year T-notes (ZNM23) finished +10.5 ticks higher, while the yield on 10-year T-notes declined -4.9 basis points to 3.290%. On Wednesday, June T-notes reached their highest level in over a week, while the yield on 10-year T-notes plummeted to a 6-3/4 month low of 3.263%. Weakness in the U.S. economy was reflected in the March ADP employment change and the March ISM services surveys, both of which boosted the price of T-notes on Wednesday. The 10-year breakeven inflation rate hit a 1-week low of 2.211 percent on Wednesday, signalling a fall in inflation expectations, which is positive for T-notes. Gains in T-notes were capped by remarks from Cleveland Fed President Mester, who argued for a "slightly deeper into restrictive zone this year" in monetary policy.


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