US stocks dropped Tuesday as higher rates continue to pressure market sentiment, and the latest batch of retail earnings raised concern about the state of the consumer. It now appears that equity markets that finally caught up to what the Treasury markets have been saying for a couple of weeks.
The benchmark 10-year Treasury yield climbed to 3.9 per cent, while the 2-year rate advanced to 4.7 per cent. These yields represent attractive risk free rates for investors
The Dow Jones Industrial Average dropped 2.1 per cent, its worst downturn since Dec. 15 2022, when it fell 2.3 per cent. The S&P 500 slid 2.0 per cent, marking its worst day since Dec. 15, when it fell 2.5 per cent. The tech-heavy Nasdaq Composite pulled back by 2.5 per cent.
Home Depot was the worst-performing Dow member, losing 7 per cent after the home improvement retailer posted weaker-than-expected revenue for the fourth quarter. The company also issued a subdued outlook.
The concentrated Dow Jones index after a strong start to the year has now slipped into negative territory.
In company news, Pfizer plans to introduce 19 drugs in the next 18 months, while CFO Dave Denton emphasizes the company's investment in acquiring science to accelerate the development of medicines, potentially spending an additional $50B to reach its 2030 revenue target.
And in EV news, Ford, LG Energy Solution, and Koç Holding have signed a non-binding memorandum of understanding to form a joint venture to create one of Europe's largest commercial electric vehicle battery cell facilities in Turkey. The project is expected to break ground later this year and production is intended to start in 2026 with at least 25 GWh of annual production capacity.
Overnight, all S&P500 sectors closed lower. Five sectors closed lower by at least 2 per cent, in which Consumer discretionary was the worst, by far, closing 3.34 per cent lower.
In commodity news, Newmont’s $17bn offer for Newcrest this month has sent tremors through the gold mining industry, lifting expectations of a new wave of consolidation and reanimating longstanding corporate rivalries. The Newmont offer, which would have created a sector giant with a market capitalisation of $54bn, has sparked a renewed buzz that M&A is coming to a sector stung by investor apathy after years of overspending and poor returns
Despite the speculation the gold price is up only 4 per cent over the last three months, the price peaked at nearly $2,000 in late January.
Futures
The SPI futures are pointing to a 0.6 per cent fall.
Currency
One Australian dollar at 8:40 AM has weakened compared to the US dollar yesterday buying 68.56 US cents (Tue: 69.13 US cents).
Figures around the globe
Across the Atlantic, European markets closed lower. London’s FTSE fell 0.5 per cent, Frankfurt lost 0.5 per cent while Paris closed 0.4 per cent lower..
In Asian markets, Tokyo’s Nikkei lost 0.2 per cent, Hong Kong’s Hang Seng dropped 1.7 per cent while China’s Shanghai Composite closed 0.5 per cent higher.
Yesterday, the Australian sharemarket closed 0.21 per cent lower at 7336.30.
Ex-dividends
AGL Energy (ASX:AGL) is paying 8 cents unfranked
Commonwealth Bank (ASX:CBA) is paying 210 cents fully franked
Domain Holdings Aus (ASX:DHG) is paying 2 cents fully franked
ECP Emerging Growth (ASX:ECP) is paying 2.2 cents fully franked
GQG Partners (ASX:GQG) is paying 1.8911 cents unfranked
Netwealth Group (ASX:NWL) is paying 11 cents fully franked
SG Fleet Group (ASX:SGF) is paying 8.913 cents fully franked
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
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