US Stocks Dip, Big Tech Holds On Soft PPI, Declining Treasury Yields: Traders Are 'All-In' On June Fed Pause

Major U.S. equity indices were broadly negative on Thursday, with only large-cap tech companies holding steady, as investors fear that lower inflation and rising jobless claims constitute early signs of an economic downturn.

The latest slew of data has prompted investors to completely price in a Fed rate hold in June and to begin boosting bets on rate cuts in the summer, with the July meeting implying a nearly 50% chance of a rate cut.

The U.S. yield curve went berserk as investors continued to buy U.S. Treasuries but avoided purchasing the maturities with the shortest remaining duration due to rising risk of debt-ceiling-induced default. 

Thursday's Cues In Wall Street

The S&P 500 index eased 0.2%, while blue-chip stocks in the Dow Jones Industrial Average fell 0.6%. The Nasdaq 100 was the outperformer, up 0.3%, while small caps in the Russell 2000 sank 1%. 

U.S. Indices’ Performance Wednesday

Analyst Color:

The positive reaction to the CPI report stemmed from the "owners-equivalent rent" component, which is seeing the slowest pricing pressure in a year, and moderating services costs, said fund manager Louis Navellier.

Earnings have outperformed expectations, with techs leading the year. Delving into the debt ceiling impasse, Navellier said, "The deficit ceiling is a political football and since 2024 is an election year, both sides are seeking to score political points."

"As long as Treasury bond yields do not panic," investors should not panic," he added.

Thursday's Trading In Major US Equity ETFs: In midday trading on Thursday, the SPDR S&P 500 ETF Trust SPY was 0.2% lower to $411.95, the SPDR Dow Jones Industrial Average ETF DIA fell 0.71% to $333.11 and the Invesco QQQ Trust QQQ was 0.4% higher to $318.80, according to Benzinga Pro data.

Almost all U.S. equity sectors were negative, excluding the the Communication Services Select Sector SPDR Fund XLC, up 1.5%, and the Consumer Discretionary Select Sector SPDR Fund XLY, up 0.3%. The worst performer for the day was the Energy Select Sector SPDR Fund XLK, down 1.3%. 

Latest Economic Data:

The Bureau of Labor Statistics reported a 0.2% monthly increase in wholesale price inflation for April, rebounding from a 0.5% drop in March, but below the expected a 0.3% increase. In annual terms, producer prices rose 2.3%, down from 2.7% in March and below the expected 2.4%. 

Core producer prices may have risen 0.2%, as expected, up from a revised flat reading in the previous month.

The weekly jobless claims report showed 264,000 in the week ended May 6, compared to 242,000 previously and 245,000 expected, rising to the highest since October 2021. 

See Also: How To Trade Futures

Stocks In Focus:

Alphabet Inc. GOOG GOOGL soared over 5%, on track for the strongest session since August 2022, as the technology giant launched AI integration into its products. 

• Walt Disney Company DIS stock slid 8% to $92, at the lowest since mid March 2023, after the company reported in-line quarterly results.
• Robinhood Markets, Inc. HOOD climbed 5% in reaction to its quarterly report.
• STERIS plc STE rose 9.3% after reporting higher-than-expected results last quarter. 
• Beyond Meat, Inc. BYND slipped 2.4% after the company announced an at-the-market equity offering. The company also reported its quarterly results Wednesday after the close.
• JD.com, Inc. JD shares climbed over 5% after the company announced its quarterly results and the appointment of CFO Sandy Ran Xu to the position of CEO. The company said the incumbent Lei Xu is retiring due to personal reasons.

Commodities, Bonds, Other Global Equity Markets:

Crude oil fell 1.7%, with a barrel of WTI-grade crude falling to $71.50. The United States Oil Fund ETF USO was 1.75% lower to $63.27 per share.  

Treasury yields further dropped, with the 10-year yield falling 6 basis points to 3.38% and the two-year yield down 4 basis points to 3.88%. The iShares 20+ Year Treasury Bond ETF TLT was 0.8% higher on the day. 

The dollar soared, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, up 0.6%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, ticked 0.5% lower to 1.0927.   

European equity indices were mixed, with Germany and Italy down, Spain and France down and U.K. flat. The iShares MSCI Eurozone ETF EZU was 0.4% lower. 

Gold fell 0.7% to $2,015/oz. The SPDR Gold Trust GLD eased 0.8% $187.22. Silver plummeted 4.7% to  $24.15, with the iShares Silver Trust SLV falling 4.8% to $22.20 per share. Bitcoin BTC/USD fell 1.6% to $27,165. 

Staff writer Piero Cingari updated this report midday Thursday. 

Related Link: Biden Blasts GOP For ‘Manufactured’ Debt-Ceiling Crisis But Drops At Least 2 Hints To End Stalemate

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