The benchmark S&P 500 and the Nasdaq are struggling for direction in early trading after Treasury yields gained on rising bets that the US Federal Reserve could delay interest-rate cuts this year.
Hawkish commentary from central bank officials last week and stronger-than-expected manufacturing and jobs reports pointed to a resilient US economy, easing the pressure on the Fed to cut interest rates quickly.
US stocks recorded weekly losses on Friday as traders scaled back expectations on the timing of rate cuts. They now see an around 51 per cent chance of the Fed announcing its first rate cut in June, according to the CME FedWatch Tool, down from about 58 per cent at the beginning of last week.
The market has also pared back expectations of more than three rate cuts this year, from between three and four a few weeks ago, according to LSEG data.
“A lot of people are trying to be overly optimistic with a Fed rate cut. It kind of doesn’t make sense,” said Michael Matousek, head trader at US Global Investors Inc.
“We’ve seen economic numbers over the past few weeks. It’s not hot but it’s still running strong. So why would you really want to cut rates?”
The yield on 10-year Treasury notes rose to its highest level since last November earlier in the session, pressuring equities, and was last at 4.417 per cent.
Market focus now shifts to the March reading of the US Consumer Price Index (CPI), due later in the week, that is expected to show a rise in headline inflation to 3.4 per cent year-on-year, from 3.2 per cent in February.
Also on the radar is the release of minutes from the Fed’s latest meeting, where it stuck to its guidance of three rate cuts in 2024.
Investors await commentary from Chicago Fed President Austan Goolsbee and his Minneapolis counterpart Neel Kashkari later in the day for policy cues.
Meanwhile, Wells Fargo raised its year-end target for the benchmark S&P 500 index to 5535 – the highest among Wall Street brokerages – from its previous forecast of 4625 .
Cushioning some losses, Tesla rose 4.6 per cent after CEO Elon Musk said the company would unveil the Robotaxi on August 8.
In early trading on Monday, the Dow Jones Industrial Average was up 72.78 points, or 0.19 per cent, at 38,976.82, the S&P 500 was up 0.83 points, or 0.02 per cent, at 5,205.17, and the Nasdaq Composite was up 14.24 points, or 0.09 per cent, at 16,262.76.
Eight of the 11 S&P 500 sectors advanced, with consumer discretionary leading gains, while information technology led declines.
Cryptocurrency-related stocks advanced, tracking rising bitcoin prices. Exchange operator Coinbase Global, crypto miner Marathon Digital and software firm MicroStrategy added between 8.2 per cent and 11.2 per cent.
Advancing issues outnumbered decliners by a 2.60-to-1 ratio on the NYSE and by a 1.74-to-1 ratio on the Nasdaq.
The S&P index recorded 15 new 52-week highs and one new low, while the Nasdaq recorded 46 new highs and 33 new lows.