Economy

The Dow Jones fell about 400 points, and yields rose to their highest levels in 2024

April 2, 2024
Cecilia Weber

US stocks opened lower on Tuesday, signaling another day of recession as health care insurers retreat and investors face the prospect of a later-than-expected interest rate cut.

The Dow Jones Industrial Average (^DJI) fell nearly 1%, or roughly over 400 points, pulling the blue-chip index back from an attempt to reach the key 40,000 level. The S&P 500 (^GSPC) fell 0.8%, while the tech-heavy Nasdaq Composite (^IXIC) fell 1.2%.

US bonds continued to struggle, with the yield on the benchmark 10-year Treasury note (^TNX) rising to around 4.38%, hovering at 2024 highs.

Stocks got off to a lackluster start to the second quarter after hitting a series of records in the first months of 2024. Hotter-than-expected manufacturing readings, which came alongside price increases paid, gave weight to growing doubts that the Fed will . Interest rates were cut in the first half of the year as the US economy showed surprising resilience.

An update to jobs data later Tuesday should provide food for thought in the countdown to Friday's jobs report, a key input into the Fed's decision-making process. The market will also listen to comments from Fed officials Michele Bowman, Loretta Mester and Mary Daly for clues on whether the inflation problem could derail the three planned interest rate cuts.

Shares of health insurance companies fell on the markets early Tuesday, after US regulators surprised the industry by failing to increase payments to private Medicare plans as usual. Humana (HUM) shares are down about 10%, while CVS (CVS) shares are down about 6%.

In individual stock moves, Tesla (TSLA) stock tumbled about 6% after the company delivered fewer cars than expected in the first quarter.

He lives4 updates

  • Shares open lower after yields rise to 2024 highs

    Stocks fell on Tuesday as bond yields rose for the second straight day.

    The Dow Jones Industrial Average (^DJI) fell nearly 1%, or roughly over 400 points, pulling the blue-chip index back from an attempt to reach the key 40,000 level. The S&P 500 (^GSPC) fell 0.8%, while the tech-heavy Nasdaq Composite (^IXIC) fell 1.2%.

    The 10-year Treasury yield (^TNX) rose nearly six basis points to nearly 4.39%, its highest level in 2024. The move comes after a hotter-than-expected reading of price increases in the ISM index for March, which… He raised inflation fears and sent out 10-year Treasuries. Treasury yields rose more than 10 basis points on Monday.

    The 10-year Treasury yield is now at its highest level since November and has surpassed a level that Mike Wilson, Morgan Stanley's chief investment officer, recently described as critical for equity investors.

    “We view 4.35% on the 10-year U.S. Treasury yield as an important technical level to monitor for signals that interest rate sensitivity may increase for equities,” Wilson wrote in a March 17 note.

    Wilson noted that large companies have been less sensitive to interest rates recently. “Small companies are likely to show greater interest rate sensitivity than large companies as yields rise,” he said.

    To Wilson's view, the Russell 2000 index of small-cap stocks (^RUT) fell more than 1% in early trading Tuesday.

  • Tesla shares fall after delivery failure

    Tesla ( TSLA ) stock stumbled in premarket trading, falling about 7% after the company delivered fewer cars than expected in the first quarter.

    Tesla announced it delivered 386,810 vehicles in the first quarter, below Wall Street estimates of 449,080 vehicles. This marks the first annual decline in first-quarter deliveries since 2020.

  • Consumer stocks in focus as gas prices rise

    Stocks being leveraged for consumer spending could get as cold as ice this spring.

    Oil prices reached $85 a barrel this morning, the highest level in five months. The advance in oil prices – which may be starting to impact the broader market – has lit a fire under gas prices nationwide. The national average of $3.51 per gallon last week was unchanged week over week — that's after prices rose for four straight weeks.

    Even so, gas prices are 16 cents higher than they were a month ago.

    “While we appear to be approaching a peak in the short term, one word of caution for those living in the mid-Atlantic and Northeast: You're not quite done switching to summer gasoline yet, so you may be in for a bit of a shock in a few weeks.”…Be Ready for some hit. For the rest of the country, as long as we don't see extenuating circumstances, we will likely be close to peak prices. Let's hope it works out and continues!” Patrick de Haan, head of petroleum analysis at GasBuddy, said in a new blog mail.

    As gas prices rise, the Consumer Discretionary Sector SPDR Fund (XLY) fell 1.4% in the past month – perhaps on concerns about consumer spending. The fund's major discretionary retailers such as Amazon (AMZN), Starbucks (SBUX), and Nike (NKE) underperformed the S&P 500 last month.

    Interestingly, Walmart (WMT) stock is up 2% in the past month as investors view the retailer as a bear trade due to rising gas prices.

  • Health insurance stock tank

    Health insurance stocks will be sent to patients' beds on Tuesday.

    Humana (HUM) is drilling 9% ahead of market, with pressure also seen on UnitedHealth Group (UNH) and Cigna (CI). The sell-off comes as US regulators have failed to increase payments to Medicare Advantage plans in line with Wall Street estimates.

    Payments are expected to rise by 3.7% on average in 2025, down about 0.2% year over year.

    This came as a “surprise,” as many on the Street had expected an increase “given the usage environment,” Lisa Gill, a longtime health care analyst at JPMorgan, said in a note to clients.

    Humana is seen as most vulnerable to the decision from the Centers for Medicare and Medicaid Services.

    Key appeal of Humana Latest annual report:

    “At December 31, 2023, we provided health insurance coverage under CMS contracts to approximately 5,408,900 individual members of the Medicare Advantage program, including approximately 851,300 members in Florida. These Florida contracts accounted for approximately $14.9 billion in premium revenue, which “This represents approximately 19% of our individual Medicare Advantage premium revenue, or 14% of our consolidated premium and services revenue for the year ending December 31, 2023.”

    Humana's earnings guidance will have to be reset in the wake of the decision and the stock could remain under pressure, RBC analyst Ben Hendricks said in a note this morning. Conversely, Hendricks recommends clients buy Cigna stock on a pullback.

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