'No Rate Cut' Bear Scares S&P 500 Into Retreat

seekingalpha04-23

The S&P 500 fell again during the third week of April 2024.The main driving force behind the falling level of stock prices are slipping expectations for when and by how much the Federal Reserve will ...

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Andrii Yalanskyi The S&P 500 (SPX) fell again during the third week of April 2024. The index closed out the week at 4,967.23, a little over three percent below the level it closed the second week. The index has dropped 5.5% below its record peak closing value from 28 March 2024. The main driving force behind the falling level of stock prices are slipping expectations for when and by how much the Federal Reserve will cut interest rates during 2024. The CME Group's FedWatch Tool anticipates the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% until 18 September (2024-Q3) when a quarter point reduction is expected, some twelve weeks longer than expected just a week earlier. The tool also projects only one rate cut in 2024, the timing of which is looking uncertain. As we illustrated in a separate analysis, that slipping timing is reducing the expected level of dividends in future quarters. Right now, we think investors have been scared by the \"no rate cut\" bear into shifting their forward-looking focus to either 2024-Q3 or 2024-Q4, with their investment time horizon being affected by the sliding expectations for when the Fed might alter the level of short term interest rates in the U.S. We're basing that hypothesis on the level the dividend futures-based model is projecting the potential level of the S&P 500 will be a month from now, as we're within the month-long window in which its projections have \"locked in\". The latest update for the alternative futures chart shows the current level of the index is consistent with the model's still-dynamic projections outside of the locked-in period:  An alternate explanation is the stock market is experiencing a regime change, in which the dividend futures-based model's basic multiplier has changed, but we would need several more weeks of data to confirm if that is the case. We're weighing these scenarios behind the scenes, where we haven't yet seen sufficient data to determine the established value of the multiplier has definitively broken from the level it has held since 9 March 2023. In the meantime, the context provided by the market-moving headlines of the week points to that market regime still holding. The week's headlines point to the rapidly slipping expected timing of rate cuts in 2024, which continued in the past week, as the continuing culprit in the decline of stock prices during the last several weeks. Monday, 15 April 2024  Signs and portents for the U.S. economy: US growth may be a global boon, but inflation could derail the train Oil slips as risk premium eases after Iran attack   Fed officials say they won't rush to cut rates until they need to see data pointing to wage inflation: Fed should not act urgently to cut rates unless required, Daly says US workers seeking record wages to consider new jobs, New York Fed says Fed's reverse repo facility plummets to lowest level in nearly three years   Bigger trouble, stimulus developing in China: China's Q1 GDP growth likely to slow, more stimulus on the cards China c.bank keeps policy rate unchanged, drains cash from banking system   Economic growth signs in Japan:Japan's machinery orders rise sharply, may ease concerns about domestic demand   Nasdaq, S&P, and Dow ended notably lower while yields rallied once againUS stocks tumble as Treasury yields rise, Middle East tensions simmer   Tuesday, 16 April 2024  Signs and portents for the U.S. economy: US single-family housing starts plunge in March Oil slips as concern eases about Middle East supply risk US manufacturing output increases in March; February data revised higher   In reversal, Fed officials claim they need more time to combat inflation before they can cut rates: Federal Reserve's restrictive policy needs more time to work, Jerome Powell says Fed could keep monetary policy tight for longer if needed, Jefferson says   Bigger trouble, stimulus developing in China as Q1 growth better than expected: China's Q1 GDP grows 5.3% y/y, well above forecast China's cycle of dollar hoarding and weakening yuan gets vicious China's new home prices decline at fastest pace since 2015 Chinese city Zhengzhou tells state-owned company to buy second-hand homes to reduce new housing inventories    Nasdaq, S&P, Dow end mixed after hawkish Powell further clouds rate cut expectations Wall Street stocks close lower on higher Treasury yields, rate expectations Gold extends record run as prices near $2,400; Citi sees $3,000 on the horizon    Wednesday, 17 April 2024  Signs and portents for the U.S. economy: US regional banks seen booking more commercial property losses, loan sales Oil dips as demand worries outweigh Middle East supply risks US wheat farmers face bleak crop economics as grain oversupply hits   Fed officials say they're in \"no hurry\" to cut interest rates:Fed to cut US rates 'at some point, but no hurry, Mester says  Bigger trouble, stimulus developing in China:At Chinese trade fair, exporters fear goods are 'as cheap as cabbage'  ECB officials looking forward to cutting Eurozone interest rates, don't want to review their inflation target anytime soon:  ECB firmly behind June rate cut but views diverge on July ECB's Vasle sees rates much closer to 3% at year-end ECB's Centeno says policy would be tight even after two rate cuts   ECB's Lagarde hints it is too early to review inflation target   Nasdaq sheds more than 1%, S&P posts four-day losing streak, Dow slips slightly  Thursday, 18 April 2024  Signs and portents for the U.S. economy: Oil extends losses on easing Middle East tension, demand concerns  Mortgage rates top 7% for the first time this year, Freddie Mac saysUS existing home sales drop in March; median price increases    Fed officials now saying they're in no \"mad dash hurry\" to cut interest rates:  Fed's Bostic says he is not in a 'mad dash hurry' on rate cutsFed's Bostic: open to a rate hike if inflation progress stalls  Fed's Williams doesn't see urgent need to cut interest rates   BOJ officials promise future rate hikes will be slow: BOJ's Noguchi says future rate hikes likely to be slow BOJ's Ueda signals possible rate hike if weak yen boosts inflation   ECB officials say they're \"crystal clear\" on cutting Eurozone interest rates in June: ECB 'crystal clear' on June rate cut, de Guindos says German home building permits tumble 18% in February, extending rout    S&P posts five-day loss for first time since Oct, Nasdaq & Dow end mixed; eyes on NetflixNetflix handily beats subscriber targets, misses on revenue forecast   Friday, 19 April 2024  Signs and portents for the U.S. economy: Oil settles slightly higher as Iran plays down reported Israeli attack Fed says 1,804 banks and other institutions tapped emergency lending facility   IMF officials getting mad at Fed officials; Fed's rate-cut foot-dragging grates on global peers at IMF meetings Fed policy on hold because of 'stalled' progress on inflation, Goolsbee says   Bigger trouble, stimulus developing in China:China's steel sector has bigger worries than Biden tariff hike  BOJ officials say rate hikes are coming:BOJ's Ueda says 'very likely' to hike rates if inflation keeps rising  ECB officials say inflation could go either way:ECB's Lagarde says inflation more likely to ease but risks both ways   Wall Street's April pullback intensifies as S&P 500 notches worst week in over a year Nasdaq, S&P tumble as Netflix, chip stocks drag; AmEx boosts Dow Netflix slips as move to end sharing subscriber count raises growth doubts AmEx surpasses profit estimate; small-business strategy in focus     The Atlanta Fed's GDPNow tool's latest estimate of real GDP growth for the first quarter of 2024 (2024-Q1) rose to +2.9% from the +2.4% growth forecast last week. Original Post  Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2429954001"}