Summary

The S&P 500 index moved toward progress on Monday, closing slightly higher than the session low. Treasury yields increased as investors brace for the week’s testimony from Jerome Powell and Tuesday’s NFP reports.

Earlier, the indices looked stronger, with the Nasdaq increasing by 1% before gradually losing all gains. Its biggest boost came from Apple after Goldman Sachs covered the company with a buy rating.

Investors are closely watching for any signals from the Federal Reserve regarding its interest rate and monetary policy plans. In addition, the NFP reports for Tuesday will also provide insight into the health of the job market, which could impact the Fed’s decision-making.

Equity Gains Erased as Treasury Yields Rise

Equities gave up their earlier gains as the 10-year Treasury yields rose. At the same time, the 2-year Treasuries rebounded from early declines following new data that showed orders for manufactured goods in the US were lower than anticipated in January.

The increase in yields weighed on valuations, particularly in tech and growth stocks, as high rates reduce cash flow. As a result, investors may be shifting their focus towards value stocks and other sectors that are less sensitive to interest rate movements.

According to Irene Tunkel, chief strategist for the BCA Research group in New York, the market is currently in a holding pattern. However, this week’s data releases will shed light on what the US economy is experiencing.

She emphasizes that people are worried about US Jobs numbers and economic data as they remain uncertain about the Fed’s next steps. But, in the end, all roads lead to the Fed. Shawn Cruz, a strategist at TD Ameritrade, says that Monday’s data release dampened investors’ hopes.

Stock Market Watch

Monday saw a mixed day for US markets, with the Dow falling by 38.69 points, or 0.12%, to close at 33,429.66. The S&P 500 dropped by 2.72 points, or 0.07%, to close at 4048.36. Meanwhile, the Nasdaq Composite lost 0.11% to close at 11,676.41.

The day was marked by weakness in the commodity-linked materials sector, which was weighed down by news that China had set a relatively low growth target for 2023 as the country continued to grapple with the impact of the economic downturn and strict COVID-19 restrictions.

As a result, China’s 5% growth prediction was much lower than the first estimates, and the news will have far-reaching impacts globally in the next few months. In addition, investors will watch the Federal Reserve’s future rate hike plans as Jerome Powell testifies at the Senate on Tuesday and Wednesday.

Since he last spoke, strong economic data and hot inflation have raised concerns that the Fed will be raising rates for longer. At the very least, investors anticipate a 0.25% rate hike, with rates peaking at 5.44% by year’s end from the current 4.67%.