Asset Classes

Free investment financial education

Language

Multilingual content from IBKR

Close Navigation
Learn more about IBKR accounts

Interest rates creating some headwinds

Posted May 24, 2024 at 9:30 am
Patrick J. O’Hare
Briefing.com

Our concluding thought yesterday was that the market would trade off NVIDIA's (NVDA) performance and that the opening act promised to be uplifting. That assumption was both right and wrong.

NVIDIA opened higher and the market followed suit, but soon there was a divergence that saw NVIDIA adding to its gains and the market rolling over. A jump in market rates following some better-than-expected manufacturing and services PMI data for May compiled by S&P Global garnered most of the blame for the market's inability to ride NVIDIA's coattails.

That was part of it, but a simpler explanation is that the market started rolling into the holiday weekend with a desire to take some money off the table following its big run off the April lows. That approach was validated in our estimation by the fact that the market's losses accelerated in the afternoon trade as market rates drifted off their highs of the session.

An ugly performance from Dow component Boeing (BA), after its CFO warned the company expects negative free cash flow for the year, was an added weight on the Dow Jones Industrial Average, which registered its worst showing of the year.

NVIDIA for its part ended the session up 9.3%. Arguably, the market did feed off NVIDIA's performance, only it did so in the sense that it was left behind as fund flows favored the AI chip leader whose business is clearly booming.

Things look a little better this morning for the broader market, but there hasn't exactly been a rush ahead of the three-day weekend to buy yesterday's pullback.

Currently, the S&P 500 futures are up 17 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 60 points and are trading 0.3% above fair value, and the Dow Jones Industrial Average futures are up 61 points and are trading 0.1% above fair value.

Gains in the mega-cap stocks, including NVIDIA, have provided most of the early support, outweighing the mixed reaction to earnings reports from Workday (WDAY) and Inuit (INTU), which are noticeably lower, and Deckers Outdoor (DECK) and Ross Stores (ROST), which are noticeably higher.

Separately, the Durable Goods Orders Report for April was mixed. Total durable goods orders increased 0.7% month-over-month (Briefing.com consensus -0.8%) following a downwardly revised 0.8% increase (from 2.6%) in March. Excluding transportation, durable goods orders were up 0.4% month-over-month  (Briefing.com consensus 0.2%) following a downwardly revised 0.0% (from 0.2%) in March.

The key takeaway from the report is that order increases were seen for most components, underscoring the idea that manufacturing activity remains supportive of ongoing growth for the U.S. economy.

Treasury yields dipped immediately on the release, but picked back up soon thereafter. The 2-yr note yield is up two basis points to 4.95% and the 10-yr note yield is up one basis point to 4.49%.

A 2-yr note yield approaching 5.00% can be considered a headwind for stocks, which have had quite the tailwind at their back for most of the past month as Treasury yields have been retreating. There just might be some added blowback today, though, if the 10-yr note yield pushes back above 4.50% and doesn't find support.

Originally Posed May 24, 2024 – Interest rates creating some headwinds

Join The Conversation

If you have a general question, it may already be covered in our FAQs. If you have an account-specific question or concern, please reach out to Client Services.

Leave a Reply

Disclosure: Interactive Brokers

Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Briefing.com and is being posted with its permission. The views expressed in this material are solely those of the author and/or Briefing.com and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: Security Futures

Security futures involve a high degree of risk and are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading security futures, please read the Security Futures Risk Disclosure Statement. For a copy visit ibkr.com

IBKR Campus Newsletters

This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.