Market Overview
The stock market experienced notable declines today, influenced by the unexpected rise in the March Consumer Price Index (CPI). The total CPI saw a month-over-month increase of 0.4%, surpassing the anticipated 0.3% rise. Similarly, the core-CPI, which omits food and energy costs, also climbed by 0.4% against the forecasted 0.3%. This surge in CPI figures led to significant losses in Treasuries, with the 10-year note yield escalating from 4.35% to 4.56% and the 2-year note yield rising by 22 basis points to 4.97%.
Interest Rate Expectations and Market Reaction
The CPI report has heightened concerns regarding the Federal Open Market Committee's (FOMC) ongoing strict stance on monetary policy, causing investors to adjust their expectations for future rate cuts. The likelihood of a rate reduction at the June FOMC meeting has dramatically decreased from 57.4% to just 17%, as indicated by the CME FedWatch Tool. Initially, the market was optimistic about six rate cuts by the end of 2024, but expectations have now been pared down to only two.
Sector and ETF Performance
The repercussions of today's economic data were widespread across the stock market, with the Invesco S&P 500 Equal Weight ETF (RSP, Financial) falling by 1.7%. Additionally, ten out of the eleven S&P 500 sectors experienced losses, varying from 0.2% to 4.1%.
Stock Highlights
Despite the general market downturn, several prominent stocks managed to close with gains:
- Meta Platforms (META, Financial) increased by 0.6%, reaching $519.83.
- Amazon.com (AMZN, Financial) rose by 0.2% to $185.95.
- NVIDIA (NVDA, Financial) gained 2.0%, closing at $870.39.
- Eli Lilly (LLY, Financial) advanced by 0.6%, ending at $761.98.
These stocks have shown remarkable performance this year, with META up by 46.9%, AMZN by 22.4%, NVDA by 75.8%, and LLY by 30.7%.
Market Indices Year-to-Date Performance
- S&P 500: +8.2%
- Nasdaq Composite: +7.7%
- S&P Midcap 400: +5.9%
- Dow Jones Industrial Average: +2.1%
- Russell 2000: +0.1%
Economic Data Review
Today's economic data provided mixed signals:
- The Weekly MBA Mortgage Applications Index slightly increased by 0.1%, following a -0.6% reading last week.
- Both March CPI and Core CPI outpaced consensus estimates, each rising by 0.4%.
- The year-over-year headline CPI acceleration could signal continued FOMC hawkishness, affecting June rate cut expectations.
- February's Wholesale Inventories matched expectations at 0.5%, showing an increase from January's 0.3%.
Looking Ahead
Key economic indicators to watch include March's Producer Price Index (PPI) and weekly jobless claims, alongside updates on natural gas inventories and global market performances in Europe and Asia.
Guru Stock Picks
Prem Watsa has made the following transactions:
- Reduce in CCAP by 12.8%
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