Global Markets Tumble as Bond Yields Surge, Economic Data Signals Hawkish Outlook

Stock indexes opened significantly lower with the S&P 500, Dow Jones Industrials, and Nasdaq 100 falling to 1-1/2 week lows. Higher bond yields dragged down stocks as the 10-year T-note yield hit a 4-month high. US economic data showed strong job openings and factory orders, strengthening the case for hawkish Fed policy. Bitcoin dipped noticeably, while health insurance stocks plummeted after regulators failed to increase Medicare payments. Tesla shares also declined sharply after reporting weaker-than-expected vehicle deliveries.

Global Markets Open Lower Amid Hawkish Economic Data and Rising Bond Yields

Stock markets across the globe opened in the red this morning, with major indices posting significant declines. The S&P 500 plunged 1.06%, the Dow Jones Industrial Average tumbled 1.08%, and the Nasdaq 100 plummeted 1.51%, reaching their lowest levels in a week and a half.

Rising Bond Yields Weigh on Stocks

A surge in bond yields has been a major headwind for stocks. The yield on the 10-year Treasury note has climbed to its highest level in four months, dampening sentiment as investors reassess the outlook for interest rate cuts by the Federal Reserve.

Hawkish Economic Data Clouds Outlook

Disappointing economic data in the United States has further undermined market optimism. The US Bureau of Labor Statistics reported a surprising increase in job openings in February, defying expectations of a decline. Additionally, factory orders rose more than anticipated, indicating a persistent strength in the labor market and industrial activity.

These figures have fueled concerns that the Federal Reserve may adopt a more hawkish stance, potentially delaying the start of interest rate cuts. The market now assigns only a 7% probability of a 25 basis point rate cut at the Federal Open Market Committee (FOMC) meeting on April 30-May 1, and a 64% chance at the subsequent meeting on June 11-12.

Bond Market Slumps

The bond market has been heavily influenced by the stronger-than-expected economic data and higher inflation expectations. The yield on the 10-year T-note has climbed to 4.403%, its highest level in four months, while the 10-year breakeven inflation rate has risen to 2.372%, a one-and-a-half week high.

European Bond Yields Rise

European government bond yields have also trended higher. The yield on the 10-year German bund has surged to 2.435%, its highest level in a week and a half, while the yield on the 10-year UK gilt has risen to 4.105%, its highest in two weeks.

Key Economic Indicators in Europe

In other economic news, the Eurozone Mar S&P manufacturing PMI has been revised upward to 46.1, reflecting a slight improvement in manufacturing activity. However, inflation expectations in the Eurozone have eased in February, with 1-year inflation expectations declining to 3.1% and 3-year inflation expectations remaining unchanged at 2.5%.

**German inflation data has also come in weaker than anticipated, with the consumer price index (CPI) rising by 0.6% month-on-month and 2.3% year-on-year, below forecasts.

Sector Movers in the US

• Health Insurance: Health insurance stocks have plummeted after US regulators declined to increase payments for private Medicare plans, disappointing industry expectations. Humana (HUM) has declined by more than 13%, leading losses in the S&P 500. CVS Health (CVS) and UnitedHealth Group (UNH) have also posted significant declines in the Dow Jones Industrials.
• Tesla: Tesla (TSLA) has plunged by more than 6% after reporting first-quarter vehicle deliveries of 386,810, well below the consensus estimate of 449,080.
• PVH Corp: PVH Corp (PVH) has plummeted by more than 22% after forecasting a 6% to 7% decline in revenue by 2025, reversing the 2% increase reported last year.
• Verve Therapeutics: Verve Therapeutics (VERV) has tumbled by more than 36% after announcing the pausing of enrollment in a study of its gene-editing treatment for high cholesterol, citing safety concerns.

Homebuilder Stocks Decline

Homebuilder stocks have retreated today as the rise in the 10-year T-note yield has cast a bearish shadow on housing demand. Lennar (LEN), PulteGroup (PHM), DR Horton (DHI), and Toll Brothers (TOL) have all declined by more than 4%.

Cryptocurrency-Linked Companies Retreat

Cryptocurrency-linked companies have also experienced losses, with the price of Bitcoin declining by more than 5%. Coinbase Global (COIN), MicroStrategy (MSTR), Marathon Digital (MARA), and Riot Platforms (RIOT) have all lost more than 5%.

Earnings Reports

Several companies are scheduled to report earnings today, including Cal-Maine Foods Inc (CALM), Dave & Buster's Entertainment (PLAY), DZS Inc (DZSI), and Paychex Inc (PAYX).