After winning Q1, Dow loses over 450 points amid rough start of Q2

The Dow dropped 488 points, or 1.2%. The benchmark had dropped more than 500 points. The S&P 500 dropped 0.9%, while the Nasdaq Composite dropped 1.1%.

Stocks had a difficult start to the second quarter as sticky inflation data from last week’s end and some positive economic data on Monday sent yields higher and lessened the likelihood that the Fed will lower rates in June. The 10-year Treasury yield rate increased to its highest point since November 28 on Tuesday, while oil prices also reached a five-month high. These developments are contributing to inflationary pressures following notable advances in the Q1 market.

With investors betting that inflation will decline enough for the Fed to begin lowering rates as the economy continues to develop, the S&P 500 is coming off a 10% rise for the first quarter, its best start to a year since 2019. The Nasdaq experienced a 9% rise in the first quarter due to a surge in stocks linked to artificial intelligence, including Nvidia.

The core personal consumption expenditures price index for February, which was issued on Friday, showed an annual increase of 2.8%, about equal to the 2.9% rate for December and January, but still well short of the Federal Reserve’s 2% inflation objective. This news led to market losses on Tuesday. After declining for 16 months in a row, the manufacturing gauge published by the Institute for Supply Management indicated growth on Monday.

Based on fed futures trading, the odds of a June rate cut have dropped from over 70% a week ago to roughly 58.8%. The current concern is whether the momentum for 2024 can last if the Fed maintains its current rate of increase.

Tesla’s stock fell almost 5% following the release of its underwhelming first-quarter delivery data. Some of this year’s biggest winners, the IT giants Nvidia, Alphabet, and Microsoft, saw a 1% decrease in value.

Following the Centres for Medicare & Medicaid Services’ completion of the rate announcement for Medicare Advantage and prescription medication coverage for 2025, health insurers experienced a decline. Government contributions to these initiatives are anticipated to increase 3.7% annually in 2025, staying the same from a previously suggested pace. Humana saw a loss of over 14%, UnitedHealth saw a 7.5% decline, and CVS Health saw an approximate 8% decline.

As oil prices rise, energy equities around the world are hitting all-time highs. The iShares Global Energy ETF (IXC) reached its highest level since September 2014 on Tuesday, rising 0.9%. Among the companies in the ETF that reached new 52-week highs on Tuesday include PetroChina, Canadian Natural Resouces, ConocoPhillips and Marathon Petroleum.

Wall Street’s miserable start to the quarter continued as the Dow Jones Industrial Average fell for a second day, as bond yields increased and traders lowered their hopes that the Federal Reserve will cut interest rates in June.