Treasury yields (^TYX, ^TNX, ^FVX) cruise higher following this week's hotter-than-anticipated inflation prints. Markets and investors alike are holding out on hope that the Federal Reserve will initiate interest rate cuts as early as June.
Yahoo Finance's Seana Smith reviews several of the biggest factors pressuring markets, from rate cut expectations to lagging Magnificent Seven members and spiking crude oil prices.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Luke Carberry Mogan.
Video Transcript
JULIE HYMAN: Joining us now with her top takeaways from the trading day is Yahoo Finance's Seana Smith, host of the Morning Brief. And one of the things that you've been watching today is something I've been watching very closely too which is the 10-year yield, which is had a big move today on the back of economic data.
SEANA SMITH: Yeah, a huge move to the upside. The biggest one day pop actually that we've seen in just about a month. And it was on the heels of that PPI print that we got out just before the bell this morning.
And the reason why we're seeing such a reaction play out within the Treasury market, within the bond market today, just because it shows how nervous the market is about Fed policy and exactly what the Fed's plan for rate cuts is going to look like later this year. When you take a look at those expectations right now, we know the market's pricing in three cuts before the end of the year.
When you take a look at the Fed swaps right now, they seem to be pushing out that first cut. It might not be until July. And we're going to get the dot plot just next week.
And so I think so much is going to be riding on what exactly that tells us about the Fed cut, about the timing of that Fed cut. And because of that, we're seeing this massive move in yields once again.
I also want to point out that this isn't exactly unusual. We have seen this over the last couple of big data releases that we've gotten over the last couple of weeks. So earlier this week, when that CPI print was released, we did see also a big reaction in the bond market.
And then also going back to the jobs data as well. And so it gets me back to the point of the market clearly very jittery and very much on edge about what the next move is going to be from the Fed.
JOSH LIPTON: Yeah, it's also we were talking earlier, Seana, too about how many some pretty notable economists saying the market's got it wrong. There aren't cuts coming. I mean, first from Apollo, Torsten Slok over there.
And I was struck by even Dr. Yardeni saying I mean, listen, I want to overstate it because his base case is still two cuts. But it was just interesting him telling clients, listen, increasing chances no cuts in his opinion.
SEANA SMITH: It is. And then you also square that with strategists out there who are still very optimistic, that we could even be getting more cuts than what the market is pricing in. We had Ryan Detrick on earlier today. And he was saying that he still thinks there's a 30% to 40% probability that the Fed could cut rates in May.
So he's not even talking about June. He's talking about May. So, clearly, much more optimistic if you want to look at it like that than what the market is currently pricing in. And, of course, what the bond market is telling us but there are very firm believers on both sides of this argument.
JULIE HYMAN: And then the other thing, of course, that you're watching that we've been talking a lot about is sort of the breakup of the Magnificent Seven. And I know Jared wrote about it again in this morning's Morning Brief. And we've seen some notable laggards there.
SEANA SMITH: We have. And you were just talking about earlier here at the top of the hour, just about the underperformance that we saw in the S&P equal weight. And we started talking about the broadening out of the market action that we had been seeing over the last several trading days.
When you take a look at that clearly not playing out today. And then even within the Mag Seven, some of the leaders of last year also under pressure in today's market action. So this all gets tied together back to what I was talking about at the top there just about the thought of the delaying a rate cut. And that could potentially slow down this market rally.
Now, Tesla, it's off about closed off 4% today. That's a very stock specific story. This isn't anything different than what we've been talking about over the last several weeks.
Clearly, the stock off pretty big since the start of the year off just about 30%. Another analyst UBS lowering their outlook on Tesla. So that's weighing down Tesla.
But NVIDIA is an interesting one. It has certainly been a very wild couple of days for NVIDIA. We know all that focus, a lot of the focus is going to be on the investor conference next week and exactly what is going to be unveiled there.
So we're seeing some choppy action there. And, of course, you can make the argument. That it's not nothing to be too concerned about given the massive run up that we've seen in.
JOSH LIPTON: It's interested NVIDIA, you got the big AI show. A lot of attention there. But Tesla, I actually don't know what a near-term catalyst would be.
I mean, if the issue is like slowing EV demand, it's just interesting. You'll hear Bulls say long-term. It's energy storage, of course. They'll get into automation. But I don't know near-term what they're counting on.
JULIE HYMAN: I don't know.
JOSH LIPTON: Every time I talk to a bull.
SEANA SMITH: The street doesn't either.
JULIE HYMAN: Yeah. And the other thing that you're looking at today oil prices.
SEANA SMITH: Oil. So this day now. So I wanted to end on something positive here and take a look at energy and how that performed today. The only S&P sector here to eke out gains, up just about 7/10 of a percent.
That riding on the back of the rally that we have seen in crude. We've got prices closing at the highest level that we've seen in just about four months. There was new supply data out today showing that supply is expected to lag this year.
Stockpiles are starting to dwindle. So you square that with a geopolitical risk aspect of this with the drone attacks on Russian refineries. That is pushing the price of crude to the upside.
And because of that, you have a lot of the larger energy plays that have actually eat down some of these gains are back in favor with investors Exxon, Chevron, among the names here closing in the green up just about 1%. Exxon the leader there.
And then also you have a name like Diamondback Energy trading at an all-time high.
JULIE HYMAN: Thanks a lot, Seana. appreciate it.
