The Buzz on Business for April 3rd, 2024

A combination and confluence of factors seemed to cause a dramatic sell-off on Wall Street Tuesday.

• Tesla, one of the Magnificent Seven companies, missed a key number, sending the stock tumbling.
• Interest rates spiked to their highest level in over four months and seem poised to head higher still.
• The JOLTS report, an indicator of strength in the labor market, came in below expectations.
• And Cleveland Fed President Loretta Mester, a member of the Federal Reserve Board of Governors gave a speech in which she said interest rate cuts are unlikely until June.

Excuse me? Was that June of 2025?

Stock Market Report

A sea of red numbers stared back at us from the giant quote machine here at World Headquarters yesterday afternoon. Stocks were down, bonds were mostly down, Bitcoin was down, and 23 of the Dow 30 stocks were down. One thing was up: volume. Oh, make that two. Gold soared to another new all-time high.

• The Dow Jones industrials were off a full one percent, or 397 points, to close at 39,170.
• The S&P 500 closed at 5,206, off 38 points. That's seven-tenths of one percent.
• The NASDAQ Composite was off almost one full percentage point, or 156 points, and closed at 16,240.
• The small caps had the worst of it. The Russell 2000 was off 38 points, that's 1.8%, and it closed at 2,065.

Bond Market Report

• The yield on the 2-year treasury was off one tick, and it closed at 4.695%.
• The 20-year was up five ticks, and it closed at 4.608%.

Oil, Gold, and Bitcoin

• Oil extended its recent gains. It closed at $85.38 a barrel. That's up $1.44.
• Gold is literally off the charts. It was up another $40.10 and now changes hands at $2,297.30 a troy ounce, a new all-time high.
• Not even Bitcoin was immune from the selling. It was off $3,649.27 and stood at $66,107.66 at 4:00 PM Eastern Time.

SELL OFF! What are the Causes?

There's no sense trying to sugarcoat it. The results of Tuesday's trading were definitely not good. It’s true that we've come a long way in the last five months, barely stopping to catch our breath, and are long overdue for a pullback.

Still, we think it's interesting and valuable to look at what set this off.

The market has really ridden higher in recent months on the backs of the Magnificent Seven. Apple stock is down about 10% this year. Tesla has been underperforming and yesterday announced that it would fall well short of its guidance on deliveries.

We are more interested in Federal Reserve Board Member Loretta Mestner’s speech. She stated that interest rate cuts are still on the table for this year, but not until June. Recall it wasn't that long ago when rate cuts were going to begin in February. Now it's June?

As regular listeners know, we think the odds favor no interest rate cuts in 2024 and maybe not in 2025, either. We think the market is likely to be disappointed if it relies on future interest rate cuts to inform trading decisions.

But if the disappointing JOLTS report is an indicator of a softening labor market, the Fed may have no choice but to cut rates in the face of rising prices and rising unemployment. Another name for this is stagflation.

Obviously, the labor market remains strong. Inflation has jumped a bit in recent months but is well below last year's levels. It's probably too soon to start using the word stagflation. But all of this bears watching, which we will do every day here on the Buzz.