Dow, S&P 500, Nasdaq slip as investors rethink rate cut bets

by skolnes October 7, 2024

written by skolnes October 7, 2024

US stocks slipped on Monday as investors overhauled their views on interest rate cuts after a blowout jobs report ahead of a week of key inflation data and the start of earnings season.

The Dow Jones Industrial Average (^DJI) fell 0.3% after notching a fresh record high as stocks soared to close the week. The S&P 500 (^GSPC) shed roughly 0.2%, while the tech-heavy Nasdaq Composite (^IXIC) led the losses with a 0.4% drop.

Hopes for an outsized rate cut from the Federal Reserve have melted away after a better-than-expected September jobs report dispelled concerns about cracks in the labor market. The benchmark 10-year Treasury yield (^TNX) hit 4% for the first time since August amid doubts about the Fed’s next move.

Traders have abandoned last week’s bets on a 0.50% rate cut in November and now see an 88% chance of a 0.25% move, according to the CME FedWatch Tool. Those expectations could drag on stocks, which have rallied to records amid confidence that big rate cuts and an economic “soft landing” were on the table.

The wait is now on for the October consumer inflation report due Thursday to provide fresh insight into whether the Fed is making progress on bringing already-cooling price pressures down to its 2% target.

The start of third quarter earnings is in focus as Goldman Sachs (GS) raised its target for the S&P 500, saying it expects higher margin growth for corporate companies. After Pepsi (PEP) results on Thursday, the season gets underway in earnest on Friday with reports from big banks JPMorgan (JPM), Wells Fargo (WFC), and BlackRock (BLK).

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Mon, October 7, 2024 at 3:30 PM GMT+2

Stocks open lower as 10-year Treasury yield tops 4%

The major averages opened lower on Monday as the 10-year Treasury yield (^TNX) rose back above 4%.

The Dow Jones Industrial Average (^DJI) fell about 0.3% after notching a fresh record high on Friday. The S&P 500 (^GSPC) shed roughly 0.3%, while the tech-heavy Nasdaq Composite (^IXIC) fell 0.5%.

The yield on the benchmark 10-year Treasury (^TNX) hit 4% for the first time since August, as hopes of another 50 basis point rate cut from the Federal Reserve faded after a stronger-than-expected September jobs report.

Oil prices extended gains on Monday following their biggest weekly increase in more than a year as markets awaited an Israeli retaliation against Iran over its missile barrage last week.

West Texas Intermediate crude futures (CL=F) advanced more than 1% to trade above $75 per barrel, after gaining more than 9% last week. Brent futures (BZ=F), the international benchmark, also advanced more than 1% to trade above $79 per barrel.
Mon, October 7, 2024 at 2:38 PM GMT+2

Pfizer stock jumps on reports of Starboard taking $1 billion stake

Pfizer (PFE) stock rose 2.6% premarket Monday as investors reacted to multiple media reports that activist investor Starboard Value has taken a $1 billion stake in the pharmaceutical giant.

Starboard has approached Pfizer executives Ian Read and Frank D’Amelio about helping turn the tides at the drugmaker, various media outlets reported, citing unnamed sources. Pfizer, the manufacturer of the world’s first-approved COVID-19 vaccine, has struggled to maintain its dominance post-pandemic. Read and D’Amelio expressed interest in assisting Starboard, The Wall Street Journal reported. Starboard’s plans and the changes it would make at Pfizer are unclear.

The stock’s moves early Monday morning will bring it into the positive for the year, but shares are far below record highs of nearly $60 in 2022.

Pfizer is set to report earnings on Oct. 29. Wall Street analysts expect the company to report revenues of $14.8 billion, up about 12% from the prior year. Only half of analysts covering the stock recommend buying it, according to Bloomberg data.