Wall Street traders sent both stocks and bonds lower after solid US factory data reinforced speculation that the Federal Reserve will be in no rush to cut interest rates.

Treasuries fell across the curve — with 10-year yields climbing over 10 basis points — as manufacturing unexpectedly expanded for the first time since September 2022 — while input costs climbed. Following the report, the amount of Fed easing priced into swap contracts for this year slid to around 65 basis points — less than forecast by policymakers. Equities also lost traction after the S&P 500 notched its fifth-straight month of gains.

“Investors are indeed front-running the possibility of yet another hawkish pivot from the Fed,” said Jose Torres at Interactive Brokers. “The Fed’s first rate cut may arrive in the second half of the year after all — with probabilities of a reduction this June inching closer to coin-flip odds.”

Later this week, a report is expected to show employment gains continued in March while wage growth moderated. Fed Chair Jerome Powell — who is set to speak Wednesday — said Friday that officials are awaiting more evidence prices are contained.

US 10-year yields hovered near their 2024 highs. The S&P 500 fell below 5,250. Megacaps were mixed, with Apple Inc. down and Microsoft Corp. up. FedEx Corp. sank as its contract with the United States Postal Service will expire in late September. The dollar rose. Oil and gold climbed as an Israeli attack in Syria threatened to widen the conflict in the Middle East.

While the market appears “content” to point toward the manufacturing release as the trigger for the move, there was already a bond selloff underway prior to the headlines, said Ian Lyngen and Vail Hartman at BMO Capital Markets. 

“Monday’s price action in the futures space suggests the pendulum of sentiment in US rates may be shifting toward the hawkish direction — although it goes without saying there remains ample room for expectations to meaningfully shift as more data is revealed,” they noted.

The Institute for Supply Management’s manufacturing gauge rose to 50.3 last month. While barely above the level of 50 that separates expansion and contraction, it halted 16 straight months of shrinking activity. At the same time, the group’s gauge of prices paid rose to 55.8, the highest since July 2022.

Perhaps “most troubling” was the jump in the prices paid, according to Michael Shaoul at Marketfield Asset Management. “This indicates that some of the ‘transitory’ relief from reflationary forces is starting to reverse.”

To Kurt Rankin at PNC, the renewed upward trend for manufacturers’ costs should serve as a reminder that risks remain at a time when Fed officials continue to cite the need for further evidence that inflation is on a sustainable path toward their 2 per cent goal.

“Rising producer costs – which are inevitably passed on to consumers – makes that evidence less likely to surface in the next few months.” he noted.

Bond traders priced in less monetary policy easing by the Fed this year — and briefly set the odds of a first move in June to less than 50 per cent.

Another factor putting pressure on bonds Monday was a raft of corporate-bond issuance.

Adobe Inc. was in the high-grade market looking to raise cash to help pay for capital expenditures, stock buybacks and acquisitions, one of seven companies selling notes. Japanese e-commerce company Rakuten Group Inc. is selling a US$1.25 billion junk bond to repurchase notes that mature this year and further out, one of four deals in the market.

It’s unclear how long the frenzied activity will continue. First-quarter sales broke records in investment-grade corporate bonds, while for high yield, activity was the highest since 2021. But issuance activity often tapers off in April — particularly after the Easter holiday. 

In this week’s commentary from the BlackRock Investment Institute, the firm said it’s “staying nimble while seeking income.”

“We think central banks will keep rates higher for longer than pre-pandemic due to persistent supply constraints,” BII said. “While income is back, tight U.S. credit spreads and long-term yield volatility pose risks.”

The strength of the U.S. economy and corporations has helped the markets navigate the disappointment some investors felt over the course of the first quarter as the Fed pushed back a number of times on market expectations for rate cuts, according to John Stoltzfus at Oppenheimer Asset Management.

“Chances for a pivot by the Fed in June appear to us somewhat subdued in comparison to what had been expected earlier this year as reflected in the futures market,” he noted. “In our view, investors’ expectations as to when, where and how much the Fed will cut this year are likely best kept right-sized near term.”

Investors who just booked profits from one of the strongest first quarters for the S&P 500 in decades are preparing for what comes next — whether that’s stocks climbing higher or crashing back to earth.

The cost of S&P 500 bullish call options expiring in one year with a 25 per cent chance of coming in the money — known as having a 25-delta — is up, while the cost of equivalent bearish puts is down. Meaning investors are ready for continued broad market advances and aren’t particularly worried about a slight pullback.

To Chris Senyek at Wolfe Research, trading in stocks is likely to get much choppier following an incredibly strong run and little fear baked into prices.

The rally in the S&P 500 has expanded valuations across the board, with an equal-weighted version of the benchmark gauge — where the likes of Nvidia Corp. carry the same heft as Dollar Tree Inc. — topping 17 times earnings.

Although that ranks in the 92nd percentile of observations since 1985, Goldman Sachs Group Inc. found that previous periods of similar overvaluation in the benchmark have usually been preceded by further gains.

“Overvaluation alone has not historically been cause for imminent concern,” a team led by Ryan Hammond told clients in a note last week. “Periods of overvaluation often persist for nearly a year and are typically benign if the subsequent economic growth environment is healthy.”

Gains in the U.S. stock market last quarter boosted confidence among equity investors to the highest in nearly two years, but sentiment is still far from the “euphoric” levels that typically signal a top, according to Bank of America Corp. strategists.

BofA’s Sell-Side Indicator edged up 22 basis points in March to 55 per cent, the highest level since May 2022, a team led by head of U.S. equity and quantitative strategy Savita Subramanian said on Monday in note to clients. Whenever the indicator was same level or lower than that average recommendation, returns were positive 94 per cent of the time over the subsequent 12 months.

“Equity gains likely bolstered confidence,” she wrote, with the S&P 500 Index’s strongest first quarter since 2019 at 10.6 per cent gain.

To Jonathan Krinsky at BTIG, the biggest risk into April is a momentum unwind. 

The Goldman Sachs Long/Short High Beta Momentum Index recently reached 32 per cent above its 200-day moving average — a level only exceeded twice in the last 15 years. It was up about 36 per cent on the quarter. Since its inception, it has only been up over 30 per cent for a quarter twice. In the following quarters, it was down 22 per cent and 23 per cent, respectively.

“With earnings season expectations already priced in, we’re watching for a few pressure points that could pose a risk to this remarkable rally,” said Mark Hackett at Nationwide. “Ultimately, the market is facing two tests right now: complacency and margin pressure. April will provide clarity for how this market will fare on both fronts.”

Corporate Highlights:

  • AT&T Inc. said that personal data from about 73 million current and former customers was leaked onto the dark web, prompting it to reset 7.6 million account passcodes.
  • Micron Technology Inc. climbed after Bank of America Corp. raised its price target on the memory-focused chipmaker to $144 from $120.
  • Delta Air Lines Inc. gained after Morgan Stanley raised the price target on the carrier’s stock to $85 from $77.
  • United Airlines Holdings Inc. asked pilots to take unpaid time off next month, a staffing cutback that could extend into late 2024 as the carrier grapples with delayed deliveries of Boeing Co. planes.
  • Nippon Steel Corp. made what it calls a formal commitment on spending and jobs to the United Steelworkers union, backing up a pledge made in an earlier meeting as the Japanese steelmaker looks to build support for its $14.1 billion acquisition of United States Steel Corp.
  • Advent International agreed to buy Canadian payments processor Nuvei Corp. for $6.3 billion, including debt, in a further sign that confidence is returning among private equity dealmakers.
  • A federal court approved the 3M Co.’s offer of at least $10 billion to settle PFAS claims of roughly 12,000 public water systems across the U.S.
  • Banks led by Goldman Sachs Group Inc. and JPMorgan Chase & Co. are launching a debt sale to boost drugmaker Endo International out of Chapter 11 bankruptcy protection.

Key events this week:

  • Eurozone S&P Global Manufacturing PMI, Tuesday
  • U.S. factory orders, light vehicle sales, JOLTS job openings, Tuesday
  • Fed’s John Williams, Loretta Mester, Mary Daly and Michelle Bowman speak, Tuesday
  • St. Louis Fed President Alberto Musalem takes office, Tuesday. He replaces James Bullard.
  • China Caixin services PMI, Wednesday
  • Eurozone CPI, unemployment, Wednesday
  • Japan services PMI, Wednesday
  • U.S. ADP employment, ISM Services, Wednesday
  • NATO foreign ministers meet in Brussels through Thursday, to mark the 75th anniversary of the alliance, Wednesday. The NATO-Ukraine Council also meets
  • Fed Chair Jerome Powell speaks, Wednesday
  • Fed’s Austan Goolsbee, Adriana Kugler and Michelle Bowman also speak, Wednesday
  • Eurozone S&P Global Services PMI, PPI, Thursday
  • U.S. initial jobless claims, Challenger job cuts, Thursday
  • Fed’s Loretta Mester, Alberto Musalem, Thomas Barkin, Patrick Harker, Austan Goolsbee speak, Thursday
  • European Central Bank publishes account of March rate decision, Thursday
  • Eurozone retail sales, Friday
  • U.S. unemployment, nonfarm payrolls, Friday
  • Fed’s Michelle Bowman, Thomas Barkin and Lorie Logan speak, Friday

Some of the main moves in markets:


  • The S&P 500 fell 0.2 per cent as of 4 p.m. New York time
  • The Nasdaq 100 rose 0.2 per cent
  • The Dow Jones Industrial Average fell 0.6 per cent
  • The MSCI World index fell 0.4 per cent


  • The Bloomberg Dollar Spot Index rose 0.3 per cent
  • The euro fell 0.4 per cent to $1.0742
  • The British pound fell 0.6 per cent to $1.2548
  • The Japanese yen fell 0.2 per cent to 151.65 per dollar


  • Bitcoin fell 1.7 per cent to $69,648.88
  • Ether fell 4.1 per cent to $3,485.04


  • The yield on 10-year Treasuries advanced 12 basis points to 4.32 per cent
  • Germany’s 10-year yield was little changed at 2.30 per cent
  • Britain’s 10-year yield was little changed at 3.93 per cent


  • West Texas Intermediate crude rose 0.9 per cent to $83.93 a barrel
  • Spot gold rose 0.6 per cent to $2,243.23 an ounce