Dow Jones dives as Treasury yields, Fed rate hike signals shake confidence

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on Apr 2, 2024
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  • The Dow Jones Industrial Average plummeted 396.61 points, or 1%, to close at 39,170.24.
  • This marked the largest single-day point and percentage decline since March 5.
  • The decline was primarily driven by losses in healthcare stocks and a notable increase in Treasury yields.

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The Dow Jones Industrial Average faced a significant downturn on Tuesday, extending its sluggish performance into the second quarter of the year.

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The decline was primarily driven by losses in healthcare stocks and a notable increase in Treasury yields.

This drop comes amidst remarks from several Federal Reserve officials emphasizing the necessity of maintaining higher interest rates for a longer duration.

The Dow Jones Industrial Average plummeted 396.61 points, or 1%, to close at 39,170.24.

This marked the largest single-day point and percentage decline since March 5, according to Dow Jones Market Data.

US Fed interest rate hike signal

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The surge in Treasury yields further fueled concerns among investors.

Federal Reserve officials, including San Francisco Fed President Mary Daly and Cleveland Fed President Loretta Mester, reiterated their stance on keeping rates higher for a prolonged period.

Daly emphasized that there was no urgency to cut rates, citing inflation figures above the central bank’s 2% target.

The CME’s FedWatch tool reflected a decrease in the probability of a Fed rate cut in June, now standing at around 62%, down from approximately 70% a week ago.

This shift follows a recent spate of robust economic data, including job openings rising to 8.756 million in February, albeit slightly below expectations.

Healthcare and EV stocks suffer

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In addition to the macroeconomic landscape, specific sectors experienced notable declines.

Healthcare stocks such as Humana Inc (NYSE:HUM), UnitedHealth Group Incorporated (NYSE:UNH), and CVS Health Corp (NYSE:CVS) suffered losses following the announcement of private Medicare Advantage rates remaining unchanged for 2024, signaling continued pressure on insurers’ margins.

Moreover, electric vehicle (EV) stocks witnessed a slump, led by Tesla (NASDAQ:TSLA), which fell 5% after reporting disappointing first-quarter delivery numbers.

The EV giant’s deliveries fell short of expectations, prompting concerns among investors and analysts about the company’s future trajectory.

Rivian Automotive (NASDAQ:RIVN), another EV manufacturer, also saw its stock decline by 5% after trailing analyst consensus for first-quarter production numbers.

Other EV stocks, including Nio Inc Class A ADR (NYSE:NIO) and Nikola Corp (NASDAQ:NKLA), followed suit with losses.

In other market news, Schlumberger NV (NYSE:SLB) announced its acquisition of oilfield equipment maker ChampionX Corp (NASDAQ:CHX) for $7.7 billion in an all-stock deal, driving shares of the latter up by 10%.

However, fashion retailer PVH (NYSE:PVH) experienced a significant slump of over 22% after providing disappointing full-year sales guidance, citing challenging macroeconomic conditions, particularly in Europe.

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