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Marks Cannot Sustain Rebound Amid High Bond Rates

Monday, April 15th, 2024

For a while there today, we had our cake and ate it too. Early trading before and directly after today’s opening bell showed a solid rebound from last week’s troubled series of trading sessions. But as bond yields and Middle East tensions remained high — both of which were present when the market was bouncing back — eventually the selloff ensued, ramping down most steeply around 1:30pm ET. The Dow slid -248 points, -0.65%, and the Nasdaq was -290 points, -1.79%. The S&P 500 and small-cap Russell 2000 closed down -1.20% and -1.48%, respectively.

The 10-year bond yield was up on a specter of higher interest rates for longer. Currently, the 10-year is now riding around 4.63% — the highest it’s been since coming down to that level in early November — while the 2-year remains tantalizingly close to 5%: 4.94%. The last time the shorter bond yield was over 5% was that same early November time period. After all, market participants had been looking for the Fed funds rate to reduce from 5.25-5.50% starting as early as March at the start of this year, and are now pushed past June. There is no real consensus yet when that first rate cut will occur.

Salesforce.com CRM posted its worst single day of trading for almost a year and a half. The stock tumbled -7.3% on both the high rates scenario and news reports that it plans to annex data management firm Informatica (INFA), for an as-yet undisclosed amount (though Informatica’s market cap is listed above $11 billion). INFA shares have also slid on the news, -6.5%. Three years ago, Salesforce had bought Slack for $28 billion and has been a major takeover player for a number of years, buying scores of companies.

Tesla TSLA announced plans to lay off more than 10% of its global workforce. This resulted in a -5.6% selloff for the EV leader in today’s session, even as shares had rolled off significantly year to date, now -35% from the start of the year. The total amount of workers to be let go is roughly 15K. Remember, Tesla’s projections for delivered EVs for the current quarter disappointed investors, and reports are now that plans are scrapped for a more affordable EV coming to market from the company.

The North American Homebuilders Confidence Index was flat at 51 for April. This is the first time in five months the index did not move higher month over month, though it did remain above the all-important 50 level. A hazy outlook on future mortgage rates has kept homebuilders from being increasingly positive on the market for the near term. Currently, the average 30-year fixed mortgage rate is 6.88%, while the average price for a new home has come down to $485K from $523K previously.

Finally, Business Inventories in February rose to +0.4% from 0.0% the previous month, hotter than the expected +0.3%. Business sales swung to the positive, +1.6% from -1.0% in January, while Wholesale inventories grew +2.3% for the month. Inventories are generally seen as the “worst” type of economic growth there is, seeing as if goods aren’t sold, backlog needs to be worked off. Though under current conditions, perhaps these might present a harbinger for lower price points. Also keep in mind this is a lagging indicator, as it looks at February rates in the middle of April.

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