U.S. stock indexes edged lower on Monday with Tyson Foods falling on disappointing quarterly results, while investors reassessed their predictions on when the U.S. Federal Reserve would start cutting rates.
The non-farm payrolls report on Friday that showed the U.S. economy added jobs at a rapid pace spooked investors.
“Markets are looking ahead to a slower start … today is a bit of a rethink on when the Fed might have to cut rates,” Art Hogan, chief market strategist at B. Riley Financial said.
“The consensus had been firmly in the camp of the fourth quarter of this year, but with the red hot jobs number there is a bit of a second guessing.”
Traders will scrutinize speeches by Fed officials this week, including Chair Jerome Powell, for any change in the central bank’s dovish rhetoric after data last week showed services activity were strong in January.
Yield on the 10-year U.S. Treasury note extended gains to more than a month’s high.
Money market participants see the Fed’s terminal rate to settle above 5% by May followed by rate cuts in September.
After being bruised in 2022, U.S. equities have recovered strongly in 2023, led by megacap growth stocks amid hopes that the Fed will temper its aggressive rate hikes, which in turn could alleviate some pressure on equity valuations.
More than 69% of the S&P 500 firms have reported results above expectations, according to Refinitiv. Overall, analysts still expect quarterly earnings of S&P 500 firms declining 2.8%.
Meanwhile, Tesla Inc (TSLA.O) bucked the overall trend with a 1.3% gain after a U.S. jury on Friday found Chief Executive Elon Musk and his company were not liable for misleading investors when Musk tweeted in 2018 that he had “funding secured” to take the electric-vehicle maker private.
At 10:24 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 179.60 points, or 0.53%, at 33,746.41, the S&P 500 (.SPX) was down 33.71 points, or 0.81%, at 4,102.77, and the Nasdaq Composite (.IXIC) was down 125.32 points, or 1.04%, at 11,881.64.
All of the 11 major S&P 500 indexes were in the red with the real-estate sector (.SPLRCR) slumping 1.5%.
U.S.-listed Chinese stocks such as Pinduoduo Inc (PDD.O) and Baidu Inc slid 4.9% and 3.0%, respectively, on geopolitical concerns after a U.S. military fighter jet shot down a suspected Chinese spy balloon off the coast of South Carolina on Saturday.
Declining issues outnumbered advancers for a 4.53-to-1 ratio on the NYSE and a 2.03-to-1 ratio on the Nasdaq.
The S&P index recorded two new 52-week highs and one new low, while the Nasdaq recorded 43 new highs and 12 new lows.