Stock market today: S&P 500, Nasdaq edge higher after Powell says rate cuts coming 'at some point' this year

US stocks were little changed Wednesday as Federal Reserve Chair Jerome Powell reiterated the Fed will likely cut interest rates this year amid inflation's "bumpy" path downward.

The S&P 500 (^GSPC) rose about 0.1%, while the Dow Jones Industrial Average (^DJI) fell around the same amount. The tech-heavy Nasdaq Composite (^IXIC) rose more than 0.2%, as the major gauges stemmed early-week performances that left stocks in a sea of red.

In a speech at Stanford University on Wednesday, Powell doubled down on his belief that inflation was on a "bumpy" path down to 2%, but that central bank officials expect to lower rates at "some point" this year.

Stocks had drifted away from their strong start to the year as robust economic data undermined hopes for three Fed rate cuts. Investors have scaled back their bets to the point where they expect a smaller, later easing than policymakers have projected.

Stocks reversed losses on Wednesday morning, though, after a reading on prices paid in the services sector hit its lowest level since March 2020, indicating potential future declines in inflation. This data stood in contrast to a similar reading from the manufacturing sector on Monday, which showed inflation pressures were on the rise last month.

In corporate news, Disney (DIS) successfully fended off activist investor Nelson Peltz in his quest to secure board seats at the company, officially ending a highly contested proxy battle that has plagued the entertainment giant and its CEO Bob Iger for months. After winning a shareholder vote to keep its board intact, Disney stock dipped more than 3%.

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Energy keeps leading the S&P 500

Wed, April 3, 2024 at 4:00 p.m. EDT, Josh Schafer

Energy (XLE) was once again one of the leading sectors in the S&P 500 (^GSPC) on Wednesday.

The sector is now handily the top performing sector this year, and some strategists have noted the gains may not be over.

DataTrek Research looked at the sectors rolling 100-day relative performance compared to the S&P 500 dating back to 2008. The chart reveals Energy is still chasing the S&P 500.

"Energy stocks are playing catch up and their history points to further near-term gains," DataTrek co-founders Nicholas Colas and Jessica Rabe wrote in a research note on Tuesday. "Oil prices have stabilized, a necessary precondition to sector outperformance. And, should we see a geopolitically-driven oil price shock this year, the group offers a unique hedge against that risk.

Source: DataTrek Research

Wage gains are increasing and could keep the Fed on hold, economist says

Wed, April 3, 2024 at 3:20 p.m. EDT, Josh Schafer

New data from ADP released Wednesday shows the median year-over-year pay increase for job switchers was 10% in March, the highest rate of growth since July 2023. Meanwhile, job stayers saw an annual wage gain of 5.1% during the month.

Wage increases have been a closely tracked metric by economists in the Federal Reserve's fight against inflation. The prevailing concern has been that if wage growth continued to rise, it could increase consumer demand for goods and services and send prices higher.

ADP chief economist Nela Richardson doesn't think ADP's recent data signals the start of a "wage-price spiral." But she acknowledged that "wages and wage growth could keep inflation higher for a bit longer."

This, Richardson said, could make the Fed's path trickier. Recent hotter-than-expected inflation readings have added to these concerns as investors fear sticky inflation could push out the Fed's interest rate cuts. And all else equal, continued wage growth won't help ease such fears.

"It could challenge the ability of the Fed to cut quickly, and I think they already know that," Richardson said.

Still, Richardson and other economists have noted that strong jobs numbers like those seen in ADP's release, which showed 184,000 private jobs were added to the labor market in March, have overall been a positive for the economic story at large. Given the Fed's cautious approach to cutting, strength in the labor market has been considered a key to the economy avoiding recession while the Fed keeps rates restrictive to help fight inflation.

Powell highlights the significance of falling inflation expectations

Wed, April 3, 2024 at 2:50 p.m. EDT, Josh Schafer

In a speech at Stanford University on Wednesday, Federal Reserve Chair Jerome Powell spoke extensively about the importance of how the general public perceives inflation's path forward.

"Having the public expect inflation to return to 2%, despite it moving up, that's a very important factor in bringing inflation back down," Powell said. "If price setters and wage setters in the economy believe that inflation will be 2%, then that will actually happen."

Powell has made these comments in the past, but Wednesday's comments stood out as they come while certain measures of inflation expectations are hovering near their lowest levels in three years.

A week ago, the latest University of Michigan survey showed consumers expect inflation to fall to 2.9% in the next year, down from expectations of 3% seen during February. The one-year inflation projections are in a range seen in 2018 and 2019 before the fallout from the pandemic in 2020 sent inflation to a 40-year high.

"It would be a concern if inflation expectations were not to be consistent with with the outcome that we seek," Powell said. "But the good news is, they're not. And, you know, I think our commitment is understood and respected and believed by the public and that's as it should be."

So perhaps the prevailing takeaway from the recent market action that's whipsawed as investors quibble over the potential signs of spiking inflation (and what they mean for Fed cuts) is that both markets and the general public respect the Fed's "commitment" to 2% inflation.

For now, as Powell points out, this is a welcome sign for any potential stickiness in inflation caused by consumers and companies accepting higher prices. In the long run, that belief from the general public in inflation's trajectory could benefit investors rooting for further declines in inflation to bring Fed easing.

Ford posts Q1 sales jump, shares rise

Wed, April 3, 2024 at 2:14 p.m. EDT, Josh Schafer

Ford (F) stock popped more than 2% after the legacy automaker reported a jump in sales during the first quarter.

Yahoo Finance's Pras Subramanian reports:

Like other legacy automakers this week, Ford is the latest to report strong first quarter sales.

Ford said Q1 US sales jumped 6.8% to 508,083 vehicles, powered by strong sales of electrified products such as hybrids and EVs. Ford’s Maverick hybrid pickup saw its best quarter ever, with sales jumping 77% in the first quarter. Maverick also powered overall hybrid sales to a 42% jump to 38,421, with Ford claiming this was also the best quarter for hybrids and that momentum will continue.

Ford's EV offerings — the Mustang Mach-E, Ford Lightning EV, and its commercial E-Transit vans —bucked the recent trend of softening demand. Ford’s overall EV portfolio saw a massive 82% jump to 20,223 EVs sold in Q1, with Mustang Mach-E jumping 77.3% to 9,589 units sold and the Lightning pickup seeing sales surge 80.4% to 7,743 units. While the sales numbers here are strong, Ford relied on heavy discounting, cheap finance rates, and lease deals to move inventory.

Disney defeats Nelson Peltz in proxy fight

Wed, April 3, 2024 at 1:27 p.m. EDT, Alexandra Canal

Disney (DIS) has successfully fended off activist investor Nelson Peltz in his quest to secure board seats at the company, officially ending a highly contested proxy battle that has plagued the entertainment giant and its CEO Bob Iger for months.

The company revealed the news during its annual meeting of shareholders on Wednesday, confirming the current Disney board will remain intact following a shareholder vote that gave Disney a win "by a substantial margin." Along with its defeat of Peltz, who had fought for seats for himself and former CFO Jay Rasulo, Disney also defeated activist Blackwells Capital, which had urged shareholders to add its three nominees to the current board.

Disney's stock traded lower immediately following the results, with shares down more than 1%.

The results represent a win for Disney in the short term as it ends months of uncertainty and distraction for Iger and the company's management team. But it also means Disney's board will face much more pressure to deliver results as the company attempts to navigate consumers' shift away from traditional cable packages into mostly unprofitable streaming services.

"Trian and Blackwells have added urgency to the turnaround, but not substance," Needham analyst Laura Martin wrote in a note to clients ahead of the results. "DIS will remain under pressure to drive shareholder upside going forward."

Read more here.

Industrials, Energy lead afternoon trade

Wed, April 3, 2024 at 1:17 p.m. EDT, Josh Schafer

All three major averages were in the green on Wednesday afternoon.

Inside the S&P 500 (^GSPC), Industrials (XLI) and Energy (XLE) were leading the gains within the index.

Source: Yahoo Finance

Powell: Fed to lower rates this year as inflation follows a 'bumpy' path down to 2%

Wed, April 3, 2024 at 12:15 p.m. EDT, Josh Schafer

Federal Reserve Chair Jerome Powell reiterated his stance that the Fed will likely reduce interest rates at some point this year in prepared remarks for a speech at Stanford University.

Yahoo Finance's Jennifer Schonberger reports:

Federal Reserve Chair Jay Powell doubled down Wednesday on his belief that inflation was on a "bumpy" path down to 2% and that central bank officials expect to lower rates at "some point" this year.

Powell also once again asserted that the Fed would maintain its independence during this red-hot election year, noting that its analysis is free from any "personal or political bias."

His comments about the inflation marked the second time in the last week that Powell offered assurances that the overall outlook had not changed much despite some hotter-than-expected readings at the start of the year.

Positive news on the inflation front

Wed, April 3, 2024 at 12:08 p.m. EDT, Josh Schafer

After a week headlined by inflation concerns prompted from an increase in prices paid in the manufacturing sector, investors were greeted by more positive news on inflation's path on Wednesday.

Prices paid in the ISM services index fell to 53.4 in March, the lowest level since March 2020.

"The plunge in the prices paid index to the lowest level since the pandemic began, implies that core services ex-housing inflation, aka supercore, will resume falling back toward its pre-pandemic normal rate," Capital Economics deputy chief North America economist Stephen Brown wrote in a note to clients.

He added, "The headline decline was due to falls in the new orders and supplier delivery time components, but the latter is hardly cause for concern at a time when markets are focused on the risk that the Federal Reserve might once again delay its loosening cycle ... On past form, [the March reading] implies PCE core services (ex-housing) inflation will drop to 2%, from 3.4% in February."

Markets noticeably jumped after the release, with all three of the major averages rising after 10 a.m. ET.

Cosmetics stocks get pounded

Wed, April 3, 2024 at 11:45 a.m. EDT, Brian Sozzi

Lots to think about after this surprise warning from cosmetics retailer Ulta (ULTA) today.

Shares of Ulta are getting pounded by 14% after CEO Dav Kimbell told JPMorgan analysts during a fireside chat he has seen a "slowdown" in the "total" cosmetics category. The slowdown is a "bit earlier" and a "bit bigger" than we thought, Kimbell added.

The news is hammering shares of e.l.f. Cosmetics (ELF) and Estee Lauder (EL) too.

I find Kimbell's comments interesting in light of the recent trends in Nielsen sales data.

Total retail sales for e.l.f. products were up 29.5% for the four weeks ended March 24, Nielsen's data shows. L'Oreal sales were up 3%, and P&G was up by 5.6%.

Is this an Ulta issue or the sign of a consumer slowdown? Unclear, but I will note this Ulta news squares well with lackluster earnings reports in the past month from Nike (NKE) and Foot Locker (FL).

Disney's proxy battle finale

Wed, April 3, 2024 at 11:30 a.m. EDT, Alexandra Canal

Walt Disney Co. (DIS) activist investor Nelson Peltz has fought for a board shake-up at the company for months. Today, investors will find out whether he has won.

The results of a shareholder vote to select board members are expected to be announced at the entertainment giant's annual stockholders meeting on Wednesday. Voting officially closes the day of the meeting, but sources told Reuters enough votes had been cast as of Tuesday evening for Disney to safely defeat Peltz.

Institutional investors Vanguard, BlackRock, and State Street serve as Disney's three largest shareholders. According to the Wall Street Journal, BlackRock has voted in favor of the company's current board. Reuters reported that Vanguard also has voted to back the existing board. The position of State Street is still unknown.

Yahoo Finance confirmed that T. Rowe Price, which holds a smaller position in Disney, has backed the company too. "We are comfortable that management has a viable plan to address the important matters facing the company," a spokesperson for the investment firm said in an email.

It's a critical moment for Disney as the company attempts to navigate consumers' shift away from traditional cable packages into mostly unprofitable streaming services. The company also faces succession questions, with CEO Bob Iger's contract set to expire at the end of 2026.

Peltz, who recently secured the support of influential proxy advisory firm Institutional Shareholder Services (ISS), is seeking board seats for himself and former Disney CFO Jay Rasulo. Peltz's hedge fund Trian Fund Management owns $3 billion of common stock in Disney, which includes the shares owned by former Marvel Entertainment chair Ike Perlmutter.

Peltz is aiming to replace two existing board members: former Mastercard executive Michael Froman and Maria Elena Lagomasino.

Disney, which has received backing from the high-profile proxy firm Glass Lewis, has defended both Froman and Lagomasino, describing the duo as "highly valued and engaged members of the board" in a statement to Yahoo Finance.

The company has said it's made "significant progress" in turning around its business. Some changes have included the implementation of an ad-supported tier for its streaming service Disney+, in addition to price increases on its streaming services and theme parks and password-sharing crackdowns.

Investors have reacted positively to the changes, sending Disney's stock up about 35% this year.

The shareholder meeting is set to take place at 10 a.m. PT/ 1 p.m. ET this afternoon. In the meantime, catch up on what you need to know here.

The current mood of investors

Wed, April 3, 2024 at 10:45 a.m. EDT, Brian Sozzi

It's fascinating to see how a tough start to April for markets has gotten investors into a tizzy.

Keep in mind it was just last week we were near record highs for the S&P 500!

To that end, smart insight into the current mood of investors out of JPMorgan's intelligence team today.

Takeaway: Investors are looking for an excuse to take profits.

Says strategist Andrew Tyler:

“Yesterday’s move triggered a number of incoming inquires about whether this is the end of the rally, how worried people should be about markets, and whether the price action foretells something much worse in the economy. I think none of these; the market closed within 1% of its all-time high … set last week. It is possible that we could see a 2-3% pullback but think you need to see either deterioration in the macro story or an earnings season that shows negative sequential growth. Equities remain sensitive to bond volatility, more so than yield levels, which is what we have seen this week with the 10-year yield moving higher by 15 basis points and the S&P 500 selling off less than 1%.”

Fed's Bostic sees Fed cutting in fourth quarter

Wed, April 3, 2024 at 10:18 a.m. EDT, Josh Schafer

Federal Reserve Bank of Atlanta president Raphael Bostic told CNBC on Wednesday morning he thinks inflation's bumpier-than-expected path down will likely mean the first Fed interest rate cut won't come until the fourth quarter of 2024.

“I think it will be appropriate for us to start moving down at the end of this year, the fourth quarter,” Bostic said in an interview with CNBC. “If that trajectory slows down in terms of inflation, then we’re going to have to be more patient than I think many have expected.”

Bostic's comments come as recent hot inflation readings have forced investors to push out their hopes of interest rate cuts at the start of the summer. As of Wednesday morning, investors were pricing in a 60% chance the Fed lowers rates at its June meeting. A month ago, investors had priced in a 74% chance, per the CME FedWatch Tool.

Stocks open mixed

Wed, April 3, 2024 at 9:35 a.m. EDT, Josh Schafer

US stocks slipped Wednesday morning as investors looked to a coming speech by Federal Reserve Chair Jerome Powell for clues to whether interest rates will stay higher for longer.

S&P 500 (^GSPC) fell about 0.1%, while the Dow Jones Industrial Average (^DJI) teetered on both signs of the flatline. The tech-heavy Nasdaq composite (^IXIC) led declines, down almost 0.4%, after the major gauges closed in a sea of red.

Tesla gets put into the penalty box by JPMorgan

Wed, April 3, 2024 at 6:40 a.m. EDT

No burying the lede here.

JPMorgan analyst Ryan Brinkman has cut his price target on Tesla (TSLA) to $115 from $130 this morning, which assumes about 30% downside from current price levels (the stock is already down 33% year to date). The revised price target stems from Brinkman "slashing" his estimates on Tesla after a lackluster deliveries report.

Some numbers of interest from Brinkman's report:

• Sees first quarter EPS of $0.42, down from a prior estimate of $0.69. The current consensus is around $0.60.

• Sees a "large" free cash outflow of $1.3 billion in the first quarter compared to a prior estimate for an inflow of $300 million. Brinkman blames this on Tesla having too much inventory after a disappointing quarter.

What Brinkman says on Tesla's stock:

"While Tesla shares are -59% from their all-time high of $409.97 reached on November 4, 2021 (vs. the S&P 500 +11%), the stock still strikes us as highly expensive, with extraordinary work and tremendous accomplishment unlike the trend in recent quarters required in coming years to grow into even our $115 price target (which at $401 billion market capitalization we nervously note values Tesla as the world’s most valuable automaker, edging out Toyota’s $391 billion), let alone current valuation of $167 per share ($580 billion)."

Intel opens its books further, and the stock gets hit

Wed, April 3, 2024 at 6:06 a.m. EDT, Brian Sozzi

Intel (INTC) shares are getting reprogrammed premarket.

Shares are off by 4% as Intel fine-tuned how it reports financials to investors. This was an expected event, but the numbers around the foundry business (a key focus for CEO Pat Gelsinger, as he explained to me on Yahoo Finance Live two weeks ago) probably caught many on the Street by surprise.

Intel said its chip manufacturing business had a $7 billion loss in 2023, larger than the $5.2 billion loss in 2022. Sales fell 31% year over year to $18.9 billion. Breakeven for the business is seen somewhere closer to 2030.

The disclosures will likely restart talk on why Intel is building plants to manufacture chips for others, which is coming at a major cost.

Stifel analyst Ruben Roy offered up the simplest-to-understand analysis on the stock following the disclosures:

“We believe Intel has a difficult road ahead as the company begins a multi-year transition phase which involves high capital intensity and an ambitious design roadmap with expectations to move through five process node transitions in four years. As Intel executes to its plan, competitors such as AMD (AMD) and Nvidia (NVDA) continue to innovate on their respective technology road maps. Intel also faces increased competition from internally-sourced CPU technologies in both the client PC market and the data center market. With this as a backdrop, we see limited upside catalysts to shares in the medium term.”