U.S. stocks fell Monday, pressured by rising Treasury yields after data pointing to underlying strength in the U.S. economy cooled investor expectations for sooner rather than later Federal Reserve rate cuts.
At 13:25 ET (18:25 GMT), the S&P 500 fell 0.4%, the NASDAQ Composite slipped 0.20%, and the Dow Jones Industrial Average was down 299 points, or 0.8%.
Treasury yields rise as manufacturing activity unexpectedly expands
The yield on the 2-year Treasury, which is sensitive to Fed policy, jumped 9 basis points to 4.712% after the ISM manufacturing purchasing managers’ Index unexpectedly rose to a reading of 50.3 from 47.8. The index reading pushed above 50, which indicates an expansion in manufacturing, for the first time since Sept. 2022.
The prices paid component of the index, a gauge of inflation, jumped to 55.8 from 52.5, signalling “raw material prices rose at their fastest pace since July 2022,” Oxford Economics.
The data supported Fed Chairman Powell’s message on Friday that the economic strength suggests the Fed doesn’t need to rush to cut rates.
“We don’t need to be in a hurry to cut,” Powell said Friday at a San Francisco Fed event. “The fact that the U.S. economy is growing at such a solid pace, the fact that the labor market is still very, very strong, gives us the chance to just be a little more confident about inflation coming down before we take the important step of cutting rates.”
The odds of a June cut were not seen at 56% from 64% last week, according to Investing.com’s Fed Rate Monitor Tool.
Microsoft continues to ride AI wave, Alphabet shines on Jefferies backing; Micron in rally mode
Microsoft (NASDAQ: MSFT) rose 1% as the tech giant plans to begin offering its chat and video app, Teams, as a standalone product, separating it from its Office suite on a global scale, Reuters reported on Monday.
It comes six months after the tech giant initiated a similar separation in Europe, responding to regulatory scrutiny over its product bundling practices.
Alphabet Inc Class A (NASDAQ: GOOG), meanwhile, rose more than 2% after Jefferies touted optimism on the stock amid expectations that the company is likely to address several investor concerns including the “AI threat,” to its advertising business and cloud revenue that has lagged rival Amazon’s (NASDAQ: AMZN) AWS.
Alphabet’s Google also agreed to amend its disclosures related to private, or “incognito,” browsing data to settle a part of a lawsuit that alleged the company collected users’ data without consent.
In chip stocks, meanwhile, Micron Technology Inc. rallied more than 6% after Bank of America hiked its price on the chipmaker to on expectations for a surge in demand for memory chips to feed the AI revolution.
AT&T in data leak woes; Tesla price Model Y price hike kicks off; Trump Media slumps on annual loss
Tesla’s (NASDAQ: TSLA) $1,000 price hike for all its Model Y variants in the United States took effect on Monday. The price hikes come amid waning demand and strong competition in China.
The announcement comes as the electric vehicle maker is expected to report weak quarterly sales as early as Tuesday amid rising competition from cheaper rivals like China’s BYD (SZ:002594).
Trump media fell nearly 25% after reporting a net loss of $58.2 million compared with a profit of $50.52M a year earlier.
