US equities finished in a sea of red, albeit off session lows, as investors processed the idea that interest rate cuts may come later than expected.
The Dow Jones Industrial Average (DJI) fell by roughly 1%, or about 400 points, reversing a quest to surpass the important 40,000 mark. The S&P 500 (^GSPC) fell 0.7%, while the tech-heavy Nasdaq Composite (^IXIC) dropped over 1%.
The yield on the benchmark 10-year Treasury (TNX) increased to 4.36%, its highest level since 2024. Crude prices (CL=F) rose to well above $85 per barrel.
Stocks have had a slow start to the second quarter after setting a run of records in the opening months of 2024. Hotter-than-expected industrial figures, combined with gains in prices paid, have added to growing doubts that the Federal Reserve will drop rates in the first half of the year, as the US economy demonstrates unexpected resilience.
In economic news, new statistics from the Bureau of Labour Statistics indicated that job postings were somewhat higher in February, while hiring increased slightly.
US equities finished in a sea of red, albeit off session lows, as investors processed the idea that interest rate cuts may come later than expected.
The Dow Jones Industrial Average (DJI) fell by roughly 1%, or about 400 points, reversing a quest to surpass the important 40,000 mark. The S&P 500 (^GSPC) fell 0.7%, while the tech-heavy Nasdaq Composite (^IXIC) dropped over 1%.
The yield on the benchmark 10-year Treasury (TNX) climbed to roughly 4.36%, reaching its highest level until 2024. Crude prices (CL=F) rose to well above $85 per barrel.
Investors looking for more indicators of labour market softening need go no farther than the Beveridge Curve.
The classic graphic, published by the Bureau of Labour Statistics, shows the unemployment rate and job vacancies rate. The BLS reported on Tuesday that the job vacancies rate stayed at 5.3%, bringing it closer to pre-pandemic levels.
However, EY chief economist Greg Daco favours a different version of this curve, which substitutes the job vacancies rate for the quit rate. Given the large increase in job vacancies caused by the epidemic, that statistic has become increasingly “a poor reading on the state of the labour market,” Daco told Yahoo Finance.
Daco believes that the quits rate is a superior indicator since it reflects a “actual transaction” between a worker and their employer. That figure has maintained at 2.2% for the past four months.
Making the modification for the quits rate, as shown in the figure below, reveals that recent curve points are becoming more in line with where the labour market stood prior to the epidemic.
“You have a quits rate that’s back to 2018 levels and an unemployment rate that’s back to 2019 levels,” Daco went on to say. “From that perspective, the soft landing has been achieved.”
Daco observes that the main fear last year was that the dots on the image would migrate to the right as unemployment increased (as seen by the purple “Great Recession” line). This would signal that an economic downturn is occurring.
However, such has not been the case thus far.
Consensus expects this to continue in the March jobs report, which is due on Friday. Economists expect the jobless rate to fall to 3.8% in March, down from 3.9% in February, according to Bloomberg consensus data, maintaining the curve in the green soft landing box in the alternative Beveridge curve.
Vix (^VIX), often known as the volatility index, witnessed its greatest gain in six weeks on Tuesday. It rose as much as 13% to trade around 15.4, reaching its highest level since February.
The moves come as investors grapple with the possibility that an interest rate cut will come later than expected. Hotter-than-expected manufacturing readings, combined with price increases, have added to growing doubts that the Federal Reserve will cut rates in the first half of the year.
In equities, tech-heavy stocks led the fall. The Nasdaq Composite (^IXIC) fell 1.2%, while the Dow Jones Industrial Average (^DJI) dropped 1.1%, or almost 400 points. The S&P 500 (^GSPC) fell by 0.9%.
Silver Lake Management, a private equity group, will take sports and entertainment powerhouse Endeavour Group Holdings (EDR) private in a deal valued at $13 billion, the firms said on Tuesday.
According to a news statement, Silver Lake will purchase all existing shares that it does not already own, while Endeavour owners will get $27.50 per share in cash. This is a 55% premium over the closing price of $17.72 on October 25, 2023, the last full trading day before Silver Lake said it was working on “strategic alternatives” to take the firm private.
Endeavour shares, which were momentarily stopped before to the news, gained roughly 2% to little under $26.
“Since 2012, Endeavor’s strategic partnership with Silver Lake and Egon Durban have been central to our evolution into the global sports and entertainment leader we are today,” Endeavour CEO Ari Emanuel said in a statement. “We believe this transaction will maximise value for all of Endeavor’s public stockholders and are excited to continue to unlock and invest in the growth opportunities ahead as a private company.”
Endeavour, which owns talent agency WME, is also the primary owner of TKO Group Holdings (TKO), the parent company of UFC and WWE.
TKO is not involved in this acquisition and will remain a publicly listed firm. Following the announcement, shares soared by more than 5%.
While Mester anticipates inflation to continue falling over time, she adds she needs more evidence to be confident.
“In my view, the inflation picture has not changed very much since the start of the year, because I had already thought that the pace of disinflation would slow down this year,” said the economist.
“Some further monthly readings will give us a better sense of whether the disinflation process is stalling out or whether the start-of-the-year readings reflect a temporary diversion on the downward path back to price stability.”
Mester became the latest Fed member to provide reassurance about the overall inflation outlook, while also emphasising that the Fed is in no haste to normalise monetary policy.
Morgan Stanley’s AlphaWise team released a new study of 2,000 US consumers today (they conduct a lot of survey work for their clients). Overall, the statistics portray a picture of a consumer with a slew of concerns that may limit purchasing in the spring and summer.
Dealing with inflation is consumers’ top concern for 2024, with 64% concerned about rising costs. The political climate in the United States is the second-most-mentioned key worry, expressed by 47% of customers and greater among upper-income consumers.