Markets Wrap: Stocks Decline as Concerns Mount Over Delayed Rate Cuts

Global stocks and bonds experienced a significant drop as positive economic data and a surge in commodity prices fueled speculation that major central banks would maintain higher interest rates for an extended period. The stock market faced pressure following better-than-expected US job openings and factory goods orders data, leading to a rise in 10-year yields to their highest levels in 2024.

Fawad Razaqzada at City Index and Forex.com noted, “Stocks bulls may find it difficult justifying buying stocks at these elevated levels as yields rise.” The market also faced additional risks from rising crude oil prices and upcoming jobs reports that could increase volatility in trading.

Citigroup’s Economic Surprise Index indicated that actual economic data was surpassing analyst expectations, with both the US and China reporting stronger-than-expected factory activity. This positive economic strength led to a pushback in expectations for the first Fed rate cut, with odds of a rate cut at the June meeting now at a coin-flip.

Despite the market’s recent slide, it has managed to avoid major pullbacks at a historic pace, with the S&P 500 experiencing minimal drawdowns. Corporate highlights included Tesla missing delivery estimates, health insurance stocks tumbling, and Autodesk disclosing an internal investigation.

Investors are closely watching key events this week, including Fed Chair Jerome Powell’s speech and US unemployment and nonfarm payrolls data on Friday. The market remains poised for a relief rally if central banks decide to cut interest rates, signaling confidence in the economy’s strength and potential benefits for equity markets.