Monday's market price action was influenced by two major macro headlines. First, a sudden cut in oil production by OPEC+ and its potential inflationary effects. Second, a lower-than-expected U.S. ISM PMI reading in March, down from 47.7 in February to 46.3, below forecasts of 47.5.
Energy stocks rallied while tech stocks suffered, and Tesla dropped by over 6% after the business missed expectations for first-quarter deliveries.
The likelihood of a 25-basis-point increase in the federal funds rate occurring next month has increased from 55% to 65%, according to the CME Group's Fedwatch.
Cues From Monday's Trading:
Major U.S. equity indices were mixed on the day. The S&P 500 was flat, slightly paring some early gains. The Dow Jones Industrial Average index rose 0.5% to 33,500 points, updating the prior month's highs. The tech-heavy Nasdaq 100 index dropped 0.8% to 13,075. The Nasdaq composite was also 0.8% lower to 12,125 pts.
| Index | Performance (+/-) | Value | |
|---|---|---|---|
| Nasdaq Composite | -0.8% | 12,128.17 | |
| S&P 500 Index | +0.05% | 4,111.66 | |
| Dow Industrials | +0.5% | 33,500.37 |
Analyst Color:
The market avoided breaking below the December lows in the first quarter, triggering a bullish signal on the “December Low” indicator, said Adam Turnquist, chief technical strategist at LPL Financial.
“April seasonality trends suggest the melt up could continue. Since 1950, the S&P 500 has posted average and median April returns of 1.5% and 1.2%, respectively,” he noted.
Historical return progressions for April show a strong first half of the month, with the S&P 500 historically climbing 1.4%, in the first 12 days of the month, capturing the majority of the gains for the month, he added.
Monday's Trading In Major US Equity ETFs:
In midday trading Monday, the SPDR S&P 500 ETF Trust SPY edged 0.1% higher to $409.77, the SPDR Dow Jones Industrial Average ETF DIA was 0.7% lower to $334.98 and the Invesco QQQ Trust QQQ fell 0.8% to $318.43, according to Benzinga Pro data.
Among U.S. equity sectors, the Energy Select Sector SPDR Fund XLE gained the most, up 4.1% on the day. The Health Care Select Sector SPDR Fund XLV was the second-best performer, up 1% on the day. The Consumer Discretionary Select Sector SPDR Fund XLY fell the most on Monday, down 1%, followed by the The Technology Select Sector SPDR Fund XLK, down 0.8%.
Latest Economic Data:
- The ISM Manufacturing PMI dropped from 47.7 in February to 46.3 in March 2023, the lowest since May of 2020 and compared to a consensus estimate of 47.5, according to the ISM Report On Business. All the subindices screened contractionary levels.
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The S&P Global US Manufacturing PMI was slightly revised lower from a flash estimate of 49.3 to 49.2 in March 2023, according to S&P data.
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St. Louis Fed President James Bullard warned the Fed should raise interest rates over 5% and that his rate forecast is higher than the board’s median projection.
In addition, he stated the rise in oil prices may make it more difficult to combat inflation, and that the markets should listen to his rate forecasts.
- Federal Reserve Governor Lisa Cook is scheduled to speak after the market close at 4:15 p.m. EDT.
See also: How To Trade Futures
Stocks In Focus:
Oil stocks traded higher taking cues from higher oil prices in the wake of OPEC+’s unexpected decision to cut output in a coordinated move. The heavyweights Exxon Mobil Corp. XOM and Chevron CVX, rose by 5.5% and 3.8%, respectively. Marathon Oil MRO, ConocoPhillips COP, Hess Corporation HES saw gains stronger than 7%.
- Tesla, Inc. TSLA slipped about 6.5% following the release of its first-quarter deliveries report.
- UnitedHealth Group Incorporated UNH rose nearly 4% after the U.S. government announced Friday a lower than expected 1.1% average cut of 2024 reimbursement rates for health insurers that offer coverage through the Medicare Advantage program.
Top Analyst Calls
- Plug Power, Inc. PLUG: Morgan Stanley downgrades from Overweight to Equal-Weight and lowers price target from $35 to $15
- Paychex, Inc. PAYX: BofA downgrades from Neutral to Underperform and lowers price target from $119 to $105
- Automatic Data Processing, Inc. ADP: BofA downgrades from Neutral to Underperform and lowers price target from $249 to $211
Commodities, Bonds, Forex, and Other Global Equity Markets:
Crude oil spiked following the OPEC+ move, approaching 2023 highs, with a barrel of WTI-grade crude rising above $80, up 6% on the day. The United States Oil Fund ETF USO rose 5.5%, breaking above February highs.
Treasury yields eased after the ISM Manufacturing PMI PMI print. The yield on the 10-year Treasury Note fell 5 basis points to 3.42%. The yield on the two-year yield Treasury Note was broadly stable at 4%.
The dollar saw losses almost erasing Friday's gains, with EUR/USD rising 0.5% to 1.089.
European equity indices were slightly weaker, with UK FTSE 100, Cac 40 and Italy FTSE Mib index the sole green exceptions. The iShares MSCI Eurozone ETF EZU was up 0.1%.
Gold rose amid lower U.S. Treasury yields, up 1% to $1,989/oz. The SPDR Gold Trust GLD was up 0.9% to 184.8. Silver eased 0.6% to $23.95, with the iShares Silver Trust SLV down 0.4% to 22.04. Bitcoin edged 0.6% lower to $28,009.
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