The Nasdaq fell on Monday, contrasting with the S&P 500, which rebounded from a two-month low to post a modest gain. This mixed performance occurred as U.S. Treasury yields remained elevated, reflecting investors’ reduced expectations for Federal Reserve rate cuts.
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Recent economic data has pointed to a resilient economy grappling with persistent inflation, putting pressure on equities. Statements from Federal Reserve officials have further contributed to the rise in bond yields. Consequently, the S&P 500 has experienced weekly losses in four of the past five weeks.
Treasury Yields Climb Amid Inflation Concerns
Treasury yields continued their upward trajectory, with the benchmark 10-year note yield reaching a 14-month high of 4.805% before closing up 1.6 basis points at 4.79%.
Market Anticipates Fewer Fed Rate Cuts
Current market pricing suggests approximately 27 basis points of cuts from the Fed this year, with the probability of a June rate cut standing at 52.9%.
Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, noted concerns about potential higher inflation figures and the extended period before rates might decrease. He highlighted the uncertainty surrounding the incoming administration’s policies. “The inflation issue is out there, and higher yields generally aren’t favorable for either the bond or stock markets,” Ghriskey stated.
Sector Performance: Healthcare Outperforms, Utilities and Tech Lag
The Dow Jones Industrial Average rose 358.67 points (0.86%) to 42,297.12, while the S&P 500 gained 9.18 points (0.16%) to 5,836.22. Conversely, the Nasdaq Composite declined 73.53 points (0.38%) to 19,088.10.
UnitedHealth Group’s 3.93% surge boosted the Dow following the Biden administration’s proposed 2026 reimbursement rates for Medicare Advantage plans, which would translate to a 2.2% payment increase. CVS Health and Humana also saw substantial gains, around 7% each, propelling the S&P 500 healthcare sector up by 1.27%.
In contrast, utilities and tech sectors underperformed. Edison International plummeted over 11.89% after a lawsuit alleged the company’s equipment sparked wildfires in Southern California.
Energy Sector Surges on Rising Oil Prices
The energy sector experienced a significant 2.25% increase, the largest daily gain among the 11 major S&P sectors. This surge was driven by rising crude oil prices, fueled by expectations that stricter U.S. sanctions on Russian oil will redirect buyers to alternative suppliers.
Upcoming Economic Data to Influence Fed Outlook
The upcoming Consumer Price Index (CPI) data and the Federal Reserve’s Beige Book on economic activity, both scheduled for release on Wednesday, are anticipated to provide crucial insights into the Fed’s policy trajectory. These reports will likely play a significant role in shaping market expectations regarding future interest rate decisions. The market awaits these releases with heightened anticipation, seeking clarity on the Fed’s response to persistent inflationary pressures and the overall economic outlook.
