The stock market is dragging Monday’s losses into Tuesday as Treasury yields rise to their highest level all year. Why are stocks down today?
Well, it appears investors are continuing to show concerns that interest rate cuts may not arrive until the second half of the year.
With jobs data coming in strong this morning, as inflation proves more stubborn that predicted, some economists believe the Federal Reserve is being granted further leeway to hold off cutting rates.
This includes former Fed president Dennis P. Lockhart.
“As long as the economy is tolerating this level of interest rates and the progress is slow at best in disinflationary terms, I don’t see them moving,” Lockhart told Yahoo Finance, referring to the chance of a rate cut at the upcoming Fed policy meeting.
At the time of writing, the S&P 500 and Nasdaq Composite are down 0.74% and 0.93%, respectively. The Dow Jones Industrial Average is on track to be the day’s biggest loser, however, it is down 0.98% heading to the bell.
The 10-year Treasury yield is trending around 4.37% today, its highest level in 2024, potentially reflecting a sort of “flight-to-safety” trade as investors ditch relatively high-risk stocks for guaranteed fixed-income assets.
This marks the second straight day of losses for the widely watched indices, fueling concerns that stocks’ strong first-quarter performance may be erased in a cold second-quarter reversal.
Why Are Stocks Down Today?
Once-darling electric vehicle (EV) maker Tesla (NASDAQ:TSLA) continues to lead the bears, down more than 5% today after announcing it delivered fewer cars than expected in its first quarter.
Tesla is the biggest S&P 500 loser this year, having shed nearly 40% of its weight, equivalent to more than $230 billion in lost value.
With Tesla, Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG, NASDAQ:GOOGL) underperforming the market this year, some analysts have started dropping the “Magnificent Seven,” the name for the top seven tech stocks. Instead, replacing the term with the “Fabulous Four,” consisting of just Nvidia (NASDAQ:NVDA), Meta (NASDAQ:META), Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN).
“If you’d have told me eight weeks ago that Apple and Tesla would be down as much as they are, oh and by the way, you’re punting when you’re going to do the rate cuts and you’re getting less rate cuts, I would have assumed the market would be down,” Ryan Detrick, Chief Market Strategist at Carson Group, told the Wall Street Journal.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
