Stocks slip, bond yields rise as rate-cut bets cool

Live10 updates

• 

  Wed, January 3, 2024 at 1:33 PM MST

  The Fed-euphoria fueled rally that finished 2023 may have put investors into an interesting conundrum.

  With so many market participants piling into risk-on areas of the market like the Russell 2000, Financials, and Real Estate to end last year, a resurgence of the 2023 tech trade in January could be the market’s biggest pain trade to start 2024.

  “Anecdotally, we were hearing that from clients and from other, other sell side firms that the equal weighted index is likely to outperform and that’s becoming overly consensus,” Bank of America US equity strategist Ohsung Kwon told Yahoo Finance.

  Therefore, Kwon’s team at BofA thinks the pain trade for markets could be if the recent shift to broadening in the market doesn’t continue in January and the the cap-weighted S&P 500 and Magnificent Seven rally in January.

  “We’re not necessarily calling for Mega Caps to rally in 2024,” Kwon clarified, though as the firm still overall believes the equal weighted S&P 500 and cyclicals will outperform.

  At this point, BofA is merely highlighting that what was once a tech-driven market consensus has clearly shifted and that could be a point to watch in the market action ahead.

• 

  Wed, January 3, 2024 at 12:58 PM MST

  Oil gains more than 3% on supply disruption worries, OPEC promises unity

  Oil jumped on Wednesday following reports of a disruption at a major Libyan oil field, and a pledge for unity from the oil alliance OPEC.

  West Texas Intermediate (CL=F) settled at $72.70 per barrel. Brent (BZ=F) crude closed at $78.25 per barrel.

  The sharp rise comes after protests forced a shutdown of El Sharara, a site which produces 300,000 barrels per day. The disruption adds to heightened concerns over supply disruptions stemming from attacks in the Red Sea region.

  On Wednesday, Iran-backed Houthi rebels said they targeted a container ship headed towards Israel. The move comes after US Navy helicopters destroyed three Houthi boats on Sunday in response to a vessel hijack attempt on the Red Sea.

  The threat of a broader conflict threatening oil production from Iran has sent prices higher.

  “The real threat to prices is the Iranian oil exports (near 2 million barrels per day) that could suddenly be taken off the global market,” Dennis Kissler, senior vice president at BOK Financial, said on Wednesday.

  Also on Wednesday, OPEC said its members “re-affirm their steadfast commitment to the shared objectives of unity and cohesion” within the organization.

  The latest output cuts announced last year by the Organization of Petroleum Exporting Countries and their allies were met with skepticism among market participants. Last month Angola said it was leaving the cartel over quota disputes.

• 

  Wed, January 3, 2024 at 12:35 PM MST

  Fed minutes: Officials see ‘diminished’ inflation risks

  Federal Reserve officials appear increasingly confident that inflation was coming under better control to end 2023.

  “Participants saw upside risks to inflation as having diminished but noted that inflation was still well above the Committee’s longer-run goal and that a risk remained that progress toward price stability would stall,” the release said.

  Additionally, participants viewed the current policy rate is “likely at or near its peak for this tightening cycle,” but the actual path will depend on “how the economy evolves.”

  Stocks were little changed following the release. The Dow Jones Industrial Average (^DJI) was down 0.3% while the benchmark S&P 500 (^GSPC) slipped about 0.4%. The Nasdaq Composite (^IXIC) dropped roughly 0.9% after a bruising session that saw tech stocks shed almost 1.6%.

• 

  Wed, January 3, 2024 at 11:39 AM MST

  Trending tickers on Wednesday afternoon

  Sofi (SOFI) stock led the Yahoo Finance trending tickers page on Wednesday; shares slipped almost 13% as the financial services company was downgraded by KBW to Underperform from Market Perform. KBW analyst Mike Perito believes the recent surge in shares, which had been up nearly 30% in the last month, might be overdone.

  Xerox (XRX) shares fell more than 8% after the company announced it plans to cut 15% of its workforce as part of an overhaul of its operating model.

  Eli Lilly (LLY) shares popped almost 4% to hit its highest level in eight weeks. UBS listed Eli Lilly as a top pharma pick for 2024 on Wednesday citing upgrades to its weight-loss drug Mounjaro among other catalysts for the stock coming this year.

  AMC (AMC) stock hit an all-time low on Wednesday. Since its meme-stock fandom, the stock has struggled amid the reopening from the COVID lockdown and the Hollywood strikes. In 2023, AMC shares lost 83%.

• 

  Wed, January 3, 2024 at 10:29 AM MST

  Real estate drags in Wednesday trade

  Interest rate sensitive sectors had ripped higher since the start of November as investors have increasingly bet on a soft landing.

  But as some doubt has crept into that narrative to start 2024, sectors like Real Estate (XLRE) that marched higher during the recent market rally are giving back some gains.

  Real Estate was the biggest laggard among the 11 sectors on Thursday, falling nearly 2% by 12:30 p.m. ET. The S&P 500 (^GSPC) was off about 0.7%.

  

  Notably, today’s market action comes as investor bets on a interest rate cut in March have softened. Investors are placing a roughly 75% chance on a cut in March as of Thursday, per the CME FedWatch tool. That’s down from the 90% chance investors saw a week ago.

• 

  Wed, January 3, 2024 at 9:35 AM MST

  ‘Little hope’ for manufacturing turnaround for now, economist says

  The December ISM manufacturing report released Wednesday showed the sector remained in contraction for the 14th consecutive month.

  Though, the index reading of 47.4 came in higher than month prior of 46.7 and above Wall Street’s estimates for 47.1.

  But with the index just inching above its lowest level in six months, Jefferies US economist Thomas Simons doesn’t see a turnaround happening yet.

  “The environment for capex investment remains very challenging due to high rates and uncertainty about the economy,” Simons wrote in a note to clients on Wednesday. “The feint hope of rate cuts coming around the corner offers some upside risk for the sector going forward, but it is still a long way off from recovery.”

  There were some bright spots in the report though, including a decrease in the prices paid component, a good sign for the fight against inflation, per economists.

  “The data show no strong signs of any change in the ongoing trend of goods disinflation,” Simons wrote.

• 

  Wed, January 3, 2024 at 8:52 AM MST

  Oil prices jump 3% on supply worries

  Oil futures rose more than 3% on Wednesday amid supply concerns following reports of a disruption to a major Libyan oilfield.

  West Texas Intermediate (CL=F) traded as high as $72.75 per barrel during the morning session. Brent (BZ=F) touched a session high of $78.29.

  Futures have been volatile over the last several sessions amid concerns of rising tensions in the Red Sea, which connects to the Suez Canal, a major pathway for shipments.

  On Tuesday oil wavered between positive and negative territory after Iran deployed a warship to the Red Sea.

  “The real threat to prices is the Iranian oil exports (near 2 mil bbls/day) that could suddenly be taken off the global market,” Dennis Kissler, senior vice president at BOK Financial, wrote in a note to clients on Wednesday.

• 

  Wed, January 3, 2024 at 8:19 AM MST

  Job openings hit lowest level since March 2021

  Job openings hit their lowest level since March 2021 in November, coming in lower than Wall Street expected and reflecting a continued cooling in the labor market to end 2023.

  There were 8.79 million jobs open at the end of November, a slight decrease from the 8.85 million job openings in October, according to new data from the Bureau of Labor Statistics released Wednesday. Economists surveyed by Bloomberg had expected there were 8.82 million openings.

  The report also showed the quits rate, a sign of confidence among workers, slipped to 2.2% down from 2.3% in the previous month. Additionally, the JOLTS report showed 5.5 million hires were made in the month, a slight decrease from the 5.9 million seen last month.

• 

  Wed, January 3, 2024 at 7:38 AM MST

  Tech lags at the open

  Bond yields rose as tech stocks sank at the open on Wednesday, continuing a trend seen the day prior.

  The Dow Jones Industrial Average (^DJI) fell 0.3% while the benchmark S&P 500 (^GSPC) slipped about 0.5%. The Nasdaq Composite (^IXIC) dropped roughly 0.7% after a bruising session that saw tech stocks shed almost 1.6%.

  Meanwhile, Bonds headed lower for a fourth day, pushing the 10-year Treasury yield (^TNX) up near 4%.

  The moves comes after Tuesday brought one of the worst starts to the year for the Nasdaq since 1972.

• 

  Wed, January 3, 2024 at 4:28 AM MST

  Labor market comes into focus

  After a rough first day of trading, investor attention on Wednesday will turn to the labor market with the monthly update on job openings and turnover — known as the JOLTS report — set for release at 10:00 a.m. ET.

  A decline in job openings throughout 2023 served as an early indicator the US labor market was slowing, and Wednesday’s data will serve as a key table-setter ahead of Friday’s December jobs report.

  Expectations are Wednesday’s report will show there 8.85 million jobs open at the end of November.