Tuesday saw a downturn in global markets, marked by the Dow Jones Industrial Average tumbling over 550 points, its most significant monthly drop since September 2022. This decline was spurred by a surge in bond yields following unexpectedly high wage data, causing fresh inflation fears and caution ahead of the Federal Reserve’s upcoming rate decision. The S&P 500 fell, snapping its five-month winning streak with an overall decrease for the month, while the Nasdaq Composite also retreated, reflecting investor fear about persistent inflation and its potential to influence Federal policy. This financial turbulence has shifted market dynamics, prompting a re-evaluation of risk as investors brace for further economic signals.

Key Takeaways:

  • Dow Jones Experiences Significant Decline: The Dow Jones Industrial Average closed the month down sharply, falling 468 points, or 1.2%, contributing to a total monthly loss of 4.3%. This marked its worst month since September 2022, underscoring investor concerns about rising bond yields and potential economic tightening.
  • S&P 500 Ends Winning Streak: The S&P 500 fell by 1.1% on the final trading day, culminating in a 3% loss for April. This downturn halted a 5-month stretch of gains, reflecting heightened investor anxiety over inflation and the looming Federal Reserve rate decision.
  • Nasdaq Composite Retreats Amid Market Volatility: The Nasdaq Composite dropped by 1.3%, finishing the month with a 3% decrease. The tech-heavy index was impacted by investor caution, despite previous strong interest in sectors like artificial intelligence.
  • US Labour Costs Surpass Expectations: US labour costs in the first quarter rose by 1.2%, exceeding the forecasted 1% increase. This rise in the Employment Cost Index is seen as a potential driver for continued inflation, influencing the Fed’s approach towards interest rates.
  • Treasury Yields Spike, Adding Pressure: The 2-year Treasury yield topped 5% following the labour cost report, signalling investor expectations of sustained inflationary pressures and a potentially more aggressive stance from the Federal Reserve.
  • European Markets Record First Negative Month Since October: The Stoxx 600 index fell by 1.49% for April, marking its first monthly decline since October. Major bourses closed lower, with autos falling 4.3% and basic resources dipping 1.14%, while healthcare stocks rose by 0.2%. This drop highlights the impact of mixed earnings and steady inflation data at 2.4% on investor sentiment across Europe.
  • Asian Markets Show Mixed Responses: In contrast to Europe, Asian markets displayed a mixed but mostly positive response. Japan’s Nikkei 225 climbed 1.24% to 38,405.66, and the Topix was up over 2% to 2,743.17. Meanwhile, China’s CSI 300 index fell slightly by 0.54% to close at 3,604.39, reflecting varied reactions to regional economic data and global market trends.
  • Eurozone Inflation Holds Steady: Inflation in the eurozone remained at 2.4% in April, aligning with economic forecasts. Despite this, core inflation saw a slight decrease to 2.7% from 2.9%, hinting at economic challenges that could influence future ECB policy decisions.
  • US Crude Oil and Brent Decline Amid Economic Concerns: US crude oil fell below $82 a barrel, specifically at $81.93, marking a 0.85% decrease, with Brent also down by 0.6% at $87.87. This downturn reflects market reactions to disappointing US inflation and manufacturing data, influencing trader expectations of potential Federal Reserve interest rate adjustments. Year to date, US crude and Brent are up by 14%.
  • Bitcoin and Cryptocurrency ETF Developments Draw Attention: Bitcoin experienced a significant downturn in April, sliding 15% to mark its worst month since the FTX collapse in November 2022, briefly dipping below the $60,000 threshold. The fall impacted related stocks, with Coinbase down 6%, MicroStrategy dropping 15%, and Marathon Digital declining 10.5%. Meanwhile, Hong Kong introduced Asia’s first spot bitcoin and ether ETFs. Despite early gains, these ETFs settled with more modest increases by day’s end, highlighting growing investor interest and the regulatory progress in cryptocurrency trading within the region.

FX Today:

  • Yen Weakens Amid US Labor Data Impact: The yen fell to 157.83 against the dollar, a drop of 0.98%, after US labour cost data indicated an unexpected rise in wages and benefits, strengthening the dollar. For the month, the yen is down 4.04% against the dollar, marking its biggest monthly decline since February 2023.
  • GBP/USD Drops Below Key Technical Levels: The GBP/USD pair dipped below the 200-day Moving Average at 1.2564, testing potential support levels. Traders are closely watching for further declines towards the year-to-date low of 1.2299, with intermediate support observed at 1.2448. If the pair recovers, resistance at 1.2620 and 1.2645 will be key levels to watch.
  • Canadian Dollar Slips Amid Strong US Dollar: The USD/CAD reached a high of 1.3750, climbing from a supply zone between 1.3680 and 1.3630. The Canadian dollar traded at 72.73 US cents, marking a 1.5% decline for April, its biggest monthly drop since October.
  • Gold Retreats Below Key Resistance Levels: Gold prices took a downturn, slipping below the crucial $2,300 mark amid the rising US Employment Cost Index and strengthening US dollar. This correction suggests potential further tests of lower support levels, with investors keeping an eye on the $2,220 and $2,200 levels for future movements. However, if it reverses its trend, the next resistance would be the $2,400 mark, followed by $2,420 and the all-time high of $2,430.
  • Silver Prices Dive Under Pressure: Silver prices dropped over 3%, falling back below $27.00. Key support might emerge around $26.12, with further potential support at the 50-day moving average near $25.50/57. Should it rebound, resistance is seen at the recent high of $27.73 and the $28.00 level.
  • Copper Faces Worst Day of the Year: Copper prices are down 2.38%, heading towards their largest daily drop since December 4, 2023. If losses extend beyond -2.44%, it would mark the worst performance since October 2, 2023. Despite the day’s losses, copper is up 13.9% for the month, its strongest monthly gain since February 2021.

Market Movers:

  • GE Healthcare Leads Declines After Earnings Miss: GE Healthcare (GEHC) faced a significant drop, closing down more than 13% after reporting Q1 adjusted of $681 million, which fell below the consensus estimate of $697.3 million. This considerable decline highlights the market’s sensitivity to earnings performances that don’t meet investor expectations.
  • Amazon Climbs on Strong Earnings Report: Amazon (AMZN) saw its shares rise by 3% in extended trading following a better-than-expected earnings and revenue report for the first quarter. The increase was driven by significant growth in its advertising and cloud computing segments, reaffirming Amazon’s robust financial health.
  • Starbucks Slides on Earnings Miss: Shares of Starbucks (SBUX) tumbled 12% in extended trading after the company reported weaker-than-expected quarterly earnings and revenue. The decline was further worsened by a surprising drop in same-store sales, raising concerns about the company’s current market positioning.
  • F5 Inc Faces Downward Pressure: F5 Inc (FFIV) closed down more than 9% after projecting Q2 adjusted EPS in the range of $2.89-$3.01, missing market expectations set at $3.07. This guidance has cast doubts about the company’s short-term profitability, impacting investor confidence.
  • Molson Coors Takes a Hit on Pessimistic Outlook: Molson Coors Beverage (TAP) ended the day down by nearly 10% after management expressed increased caution about the year ahead due to disappointing industry performance in early April. This outlook has led to a negative reaction from the market, reflecting the challenges in the beverage sector.
  • Warner Bros Discovery Drops Amid Broadcast Partnership Concerns: Warner Bros Discovery (WBD) saw its shares fall more than 9% following reports that Comcast seeks to replace Warner Bros as one of the broadcast partners for the NBA. This news has negatively impacted investor sentiment, as it could affect future revenue streams from sports broadcasting.
  • Paccar Anticipates Lower CAPEX: Paccar (PCAR) ended the day down more than 6% after forecasting full-year capital expenditures of $700 million-$750 million, with the midpoint below the consensus of $728.9 million. This lower-than-expected CAPEX guidance suggests a possible slowdown in investment, affecting investor expectations.
  • Tesla Slides on News of Job Cuts: Tesla (TSLA) fell more than 5% after reports surfaced that CEO Elon Musk plans additional job cuts across the company. This news, coupled with the departure of two senior executives, has raised concerns about Tesla’s operational stability and future growth prospects.

As April draws to a close, the financial landscape is shaken by a combination of rising bond yields, unexpected labour cost increases, and mixed earnings reports, causing notable fluctuations across major indices. The Dow and S&P 500 have faced significant retreats, marking the end of robust streaks and highlighting the market’s sensitivity to inflationary pressures and Federal Reserve policy expectations. While sectors like technology and healthcare showed divergent performance, the overall sentiment in global markets is one of caution, as investors deal with economic signals and position themselves for potential shifts in monetary policy.