The Dow Jones and S&P 500 indexes fell on Monday (1), weighed down by investor concerns about the timing of interest rate cuts by the Federal Reserve, after stronger-than-expected manufacturing data boosted Treasury yields. .
The Institute for Supply Management (ISM) reported that its manufacturing Purchasing Managers’ Index (PMI) rose to 50.3 last month, the highest and first reading above 50 since September 2022. from 47.8 in February. This suggested that the manufacturing sector, which has been battered by higher interest rates, was recovering.
The Nasdaq technology index closed slightly higher, along with the technology sector of the S&P 500. A semiconductor index rose 1.2%.
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Ten-year and two-year Treasury yields jumped to two-week highs following the industrial sector data.
The Dow Jones fell 0.60% to 39,566.85 points. The S&P 500 lost 0.20%, to 5,243.77 points. The Nasdaq gained 0.11% to 16,396.83 points.
The U.S. interest rate futures market was pricing in a 58% chance of a key rate cut in June, down from 64% a week ago, according to CME’s FedWatch tool.
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“We would prefer a stronger economy with fewer rate cuts than a weaker economy with more rate cuts, but on a near-term basis the narrative has shifted to about three rate cuts,” said Keith Lerner, strategist- head of markets at Truist Wealth.
Senior Fed officials — Director Christopher Waller and Atlanta Fed President Raphael Bostic — said they preferred fewer than three cuts this year.
Most sectors in the S&P 500 declined, with real estate, healthcare and utilities among the worst performers. The energy sector made gains from rising crude oil prices.
