Stocks finished in the red Wednesday while Treasury yields and the dollar spiked, as investors pulled stocks back from near-record highs amid concerns that faster inflation will keep Federal Reserve borrowing rates elevated for much of the year.
The Dow Jones Industrial Average tumbled 411.32 points, or 1.06%, while the S&P 500 slipped 0.74% and the tech-heavy Nasdaq lost 0.58%.
While the S&P 500 has printed no fewer than 24 record highs this year, and has powered to a five-month gain of around 11.25%, global government bond portfolios are down 4.9% for the year, according to data from Bank of America's “Flow Show” report.
Bond investors are typically the most acutely sensitive to inflation risks, given the nature of fixed income pricing and the arithmetic that defines most of the market's related products.
The Treasury's $69 billion sale of 2-year notes, held just hours ahead of a $70 billion sale of 5-year paper, drew muted interest from both foreign and domestic investors and left Wall Street banks holding a larger-than-expected portion of the overall auction to cushion the blow.
Updated at 1:36 PM EDT
Big Mac pushback
McDonald's (MCD) issues a statement Wednesday that challenged some recent social media discussion that the world's biggest restaurant chain has been raising prices at a much faster rate than inflation.
"This is inaccurate," said group president Joe Erlinger in a post on the company's website. "And for a brand that proudly serves nearly 90% of the U.S. population every year, we feel a responsibility to make sure the real facts are available."
McDonald's shares were marked 1.4% lower in afternoon trading and changing hands at $205.07 each, extending their 2024 decline to around 16%.
Updated at 12:29 PM EDT
Trump Musk talks
Former President Donald Trump, who is currently awaiting the decision of a New York jury in a trial tied to hush money payments for a adult film star in 2016, has held talks with Tesla (TSLA) CEO Elon Musk over a role as a potential advisor.
The Wall Street Journal reported the Trump, the presumptive Republican Presidential nominee, has asked Musk to advise him on a range of issues should he win a second term in November.
Musk, who completed his purchase of Twitter, now know as X, in the fall of 2022, rescinded a ban on Trump's account that was put in place by former CEO Jack Dorsey.
The people have spoken.
— Elon Musk (@elonmusk) November 20, 2022
Trump will be reinstated.
Vox Populi, Vox Dei. https://t.co/jmkhFuyfkv
Updated at 10:58 AM EDT
American slump
American Airlines shares are extending their premarket decline, and are on pace for their biggest single-day decline since the pandemic, after the carrier slashed its current-quarter profit forecast and suggested it could reduce capacity into the second half of the year.
CEO Bob Isom told an industry event held by Bernstein that domestic pricing remains weak, and has "worsened materially" since April, but stressed the group is taking "immediate actions" to respond and adapt.
American shares were last marked 14.9% lower at $11.45 each, while rival carriers United Airlines (UAL) and Delta Air Lines (DAL) fell 1.8% and 2.2% respectively.
$AAL -15%
— Mike Zaccardi, CFA, CMT 🍖 (@MikeZaccardi) May 29, 2024
worst day in almost 4 years pic.twitter.com/uAxf3WGrtV
Updated at 10:16 AM EDT
Bonds beware
The bond market has reacted sharply to a series of data points suggesting inflation will remain elevated well into the summer months, and a spike in yields yesterday following two muted Treasury auctions has benchmark paper trading at the highest levels in more than a month.
Benchmark 10-year note yields, which ended the first quarter at 4.194%, were last marked 4 basis points higher on the session at 4.594%, while 2-year notes were trading at 4.962%, a near 75 basis point gain from end-quarter levels.
Related: Bond markets sound inflation alarm, testing record run for U.S. stocks
Updated at 9:37 AM EDT
Red open
The S&P 500 was marked 42 points, or 0.8% lower in the opening minutes of trading, with the Dow extending its recent decline with a 430 points slump.
The Nasdaq, meanwhile, was down 124 points, or 0.74%, as 10-year notes edged to 4.584% and 2-year notes were marked at 4.960%.
S&P 500 Opening Bell Heatmap (May 29, 2024)$SPY -0.73% 🟥$QQQ -0.75% 🟥$DJI -0.91% 🟥$IWM -1.40% 🟥 pic.twitter.com/pMPDt4Bi4Y
— Wall St Engine (@wallstengine) May 29, 2024
Updated at 9:00 AM EDT
7-Up
Mortgage rates bumped higher for the first time in a month last week, data from the Mortgage Bankers' Association indicated Wednesday, as higher Treasury bond yields clipped overall applications and purchase activity into the Memorial Day weekend.
The average rate on a 30-year conforming loan rose 4 basis points to 7.05%, the MBA said, while jumbo loan balances (greater than $766,550) rose 4 basis points to 7.22%.
Related: Housing has a problem bigger than interest rates
Stock Market Today
Stocks ended mixed yesterday, with the S&P 500 booking a modest gain and the Nasdaq closing at a record, past the 17,000-point mark, on the strength of renewed earnings optimism and a resilient domestic economy.
Data from the Conference Board showed U.S. consumer confidence jumped firmly in May, suggesting a path for robust consumer spending into the summer months.
However, two benchmark bond auctions, which formed part of the Treasury's $183 billion in weekly funding, drew muted interest from both foreign and domestic investors amid worries that headline inflation levels could stay elevated alongside the improving economic growth story.
Set against comments from Minneapolis Fed President Neel Kashkari, who repeated his view that another rate hike can't be excluded, Treasury yields shot to the highest levels in more than a month.
Benchmark 10-year notes were marked at 5.471% in overnight dealing, with 2-year notes rising to 4.958% and ready to test the 5% mark. The dollar jumped 0.1% against a basket of its global peers to trade at 104.707.
Related: Fed rate cuts face big reset on renewed inflation risks
The CME Group's FedWatch, meanwhile, now suggests just a 44% chance of a September rate cut, down from as high as 72% early last month.
The rise in yields has stocks looking at a notable pullback this morning, with futures contracts tied to the S&P 500 suggesting a 2 point opening bell decline and those linked to the Dow Jones Industrial Average suggesting a 205 point slump.
The tech-focused Nasdaq, which closed at 17,019.88 points last night, is called 100 points lower.
Stocks on the move include American Airlines (AAL) , which was marked 8.3% lower in premarket trading. The carrier slashed its second-quarter-profit forecast and said Vasu Raja, its chief commercial officer, would leave the group next month.
Related: Goldman Sachs shifts interest-rate outlook ahead of key inflation report
In overseas markets, Europe's Stoxx 600 fell 0.61% in early Frankfurt trading, as benchmark 10-year German government bonds rose to a one-month high of 2.606%. Britain's FTSE 100 slipped 0.3% in London.
More Wall Street Analysts:
- Analyst unveils new Nike price target ahead of big summer for sports
- Analysts weigh in on Google-parent Alphabet’s stock after cloud event
- Analysts revamp Disney stock price target after proxy fight
Overnight in Asia, Japan's Nikkei 225 closed red for the third consecutive session, falling 0.77% amid the downdraft from last night's late weakness on Wall Street.
The regionwide MSCI ex-Japan index, meanwhile, fell 1.58% into the close of trading.
Related: Veteran fund manager picks favorite stocks for 2024
