Stock Market Today: Stocks slip, bond yields leap as Fed rate cut bets fade

Stocks face a key test this week with no tech earnings and as bets on a spring interest-rate cut from the Federal Reserve are fading.

Feb 5, 2024 - 20:30

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Stock Market Today: Stocks slip, bond yields leap as Fed rate cut bets fade

Check back for updates throughout the trading day

U.S. equity futures slipped lower Monday, while Treasury yields and the dollar powered to multiweek highs, as investors recalibrated Federal Reserve rate forecasts ahead of another busy five-day stretch for corporate-earnings reports.

Updated at 9:14 AM EST

Snap cut

Snap (SNAP) - Get Free Report, the tech group behind the instant-messaging app Shatchat, is planning to cut its global workforce by around 10%, adding to a spate of recent job cuts in the tech space that suggest overall labor market weakness heading into early 2024.

Snap filed notice of its pending job cuts with the Securities and Exchange Commission.

Snap shares were marked 2.4% higher in pre-market trading to indicate an opening bell price of $17.46 each.

Updated at 8:10 AM EST

Big Cat

Caterpillar (CAT) - Get Free Report shares are a notable early mover, rising around 4% in pre-market trading after the industrial equipment maker posted a better-than-expected fourth quarter earnings reported powered in part by big gains from its energy and transportation division.

Stock Market Today

Stocks powered to another record close on Friday, paced by Meta Platforms' (META) - Get Free Report largest single-day gain in history, as investors shrugged off both a blowout January jobs report and hawkish remarks earlier in the week on rate cuts from Fed Chairman Jerome Powell.

The economy added a much larger than expected tally of 353,000 new jobs last month, the Labor Department reported Friday, with the month-on-month gain in average hourly earnings rising a hotter-than-forecast 0.6%.

The Atlanta Fed's GDPNow forecasting tool, meanwhile, suggests the economy is growing at 4.2% clip, while the Organization for Economic Cooperation and Development boosted both its global and U.S. forecasts this morning, citing "high-frequency activity indicators (that) generally suggest a continuation of recent moderate growth."

Fed Chairman Jerome Powell said the central bank would be 'prudent' in determining the timing of its next rate move.
Chip Somodevilla/Getty Images

Labor market strength, as well as the economy's overall resilience, suggests the Fed won't be in any rush to lower its benchmark borrowing rate, Powell reiterated in an interview with CBS's "60 Minutes", which aired late Sunday.

"We think the economy's in a good place. We think inflation is coming down. We just want to gain a little more confidence that it's coming down in a sustainable way toward our 2% goal," Powell said in the interview, which took place on Thursday, Feb. 1.

"The prudent thing to do [is to] just give it some time and see that the data continue to confirm that inflation is moving down to 2% in a sustainable way,” Powell added.

Traders are now pricing in just a 15.5% chance of a March rate cut, according to CME Group's FedWatch tool, with the odds of a May reduction now pegged at around 65%. The bulk of the bets suggest the Fed will lower its benchmark rate, which currently stands at 5.25% to 5.5%, by a quarter percentage point.

Bond yields are also trading firmly higher, with prices falling sharply, in the wake of last week's jobs data and the broader economic strength. Benchmark 10-year Treasury-note yields are pegged at 4.087% in early New York dealing, up around 5 basis points from Friday's closing levels.

The U.S. dollar index, meanwhile, rose 0.36% in overnight trading to change hands at a two-month high 104.271.

With few headline economic data releases this week, investors are likely to focus on another busy earnings slate, with around 76 S&P 500 companies reporting this week, including Eli Lilly (LLY) - Get Free Report, Caterpillar (CAT) - Get Free Report, Ford (F) - Get Free Report, Disney (DIS) - Get Free Report and PepsiCo (PEP) - Get Free Report.

Around 80% of the 230 S&P 500 companies have reported so far this earnings season, according to LSEG data, with collective profits estimated to rise 7.8% from a year earlier to a share-weighted $468.2 billion.

Heading into the start of the trading day on Wall Street, stock futures tied to the S&P 500, which is up just under 4% for the year, are priced for an 8-point opening-bell decline. Those linked to the Dow Jones Industrial Average suggested a 20-point gain.

The tech-focused Nasdaq, which ended Friday with a 2024 advance of 4.1%, is set for a 26-point decline.

In overseas markets, stocks in Asia were mixed, with the MSCI ex-Japan benchmark slipping 0.5% into the close of trading and the Nikkei 225 rising 0.54% in Tokyo.

In Europe, the Stoxx 600 was marked 0.2% higher in early Frankfurt trading, while the FTSE 100 rose 0.53% in London.

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