U.S. stocks struggled for direction in the first session of May following one of the worst monthly performances for the S&P 500 since the depths of the pandemic in 2020.
The S&P 500, Dow and Nasdaq each fluctuated between gains and losses intraday on Monday. U.S. crude oil prices fell to hover above $101 per barrel, and the benchmark 10-year Treasury yield held above 2.9%, or near its highest level since December 2018.
Investors this week are bracing for more potentially market-moving events to take place following April’s volatile stretch of trading. The S&P 500 sank by 8.8% in April for its worst monthly performance since March 2020. Tech stocks especially were battered, and the Nasdaq Composite slid by 13% last month for its worst since October 2008.
The Federal Reserve’s next monetary policy-setting meeting will be especially closely watched in the days ahead, with the central bank poised to release its latest policy statement and hold a press conference with Fed Chair Jerome Powell Wednesday afternoon. Market participants expect the Fed will raise rates by 50 basis points at the end of this meeting, marking the first rate hike of that magnitude since 2000. This would follow the 25 basis-point rate hike the Fed carried out in March, bringing the target range for the federal funds rate to between 0.25% and 0.50% and raising the low end of the range above zero for the first time since March 2020.
The Fed is also expected to formally announce that it will begin quantitative tightening, or rolling assets off of its $9 trillion balance sheet. The central bank had scooped up assets and added to its balance sheet over the course of the pandemic as another means of helping support the virus-stricken economy. However, expectations for the undoing of this build have stirred up volatility after markets became accustomed to these easy money policies.
And with U.S. GDP growth turning negative for the first time since mid-2020 in the first quarter of this year, some pundits have begun to question whether the Fed will be able to tighten monetary policies without setting off a deeper downturn in economic activity.
“Recession risk has risen, and the financial health of the private sector may ultimately determine whether policy tightening will tilt the economy into a downturn,” Goldman Sachs Chief Economist Jan Hatzius wrote in a note Sunday. “Financial fragility in the private sector has historically amplified the impact of the headwinds confronting today’s expansion: higher interest rates, rapid wage inflation, and slowing growth.”
Meanwhile, earnings season will also press on this week, with a number of closely watched companies from Airbnb (ABNB) to Uber (UBER) and Lyft (LYFT) and Block Inc. (SQ) each reporting results. Heading into this week, 55% of S&P 500 components had reported actual first-quarter results, and of these, 80% topped earnings per share estimates, while 72% exceeded revenue expectations, according to data from FactSet.
The expected earnings growth rate for S&P 500 companies in aggregate has also now risen to 7.1%, up from the 4.7% seen at the end of March, FactSet noted. Still, if 7.1% remains the actual earnings growth rate for the index in the first quarter, it would mark the slowest rate since the fourth quarter of 2020.
11:12 a.m. ET: U.S. manufacturing sector expansion unexpectedly slows in April to 20month low: ISM
The U.S. manufacturing sector expansion unexpectedly slowed during the month of April, with ongoing supply chain and pricing pressures dragging on goods-producing firms’ output.
The Institution for Supply Management’s April manufacturing index dipped to a 20-month low of 55.4 from March’s 57.1. Consensus economists were looking for a reading of 57.6, according to Bloomberg data. Readings above the neutral level of 50.0 indicate expansion in a sector.
The decline “is mostly due to weakening demand amid a broader slowdown in global manufacturing, rather than a renewed supply crunch,” Michael Pearce, Capital Economics senior U.S. economist, wrote in a note. “Most of the weakness in the ISM appears to reflect softening demand, particularly from the rest of the world, rather than a renewed intensification of supply constraints.”
Beneath the headline index, employment saw one of the most marked drops, with the ISM manufacturing employment subindex declining to 50.9 in April from 56.3 in March. More encouragingly, however, the prices paid subindex declined to 84.6, indicating some moderating of inflationary pressures for manufacturers, even as the level remained high by historical standards.
9:32 a.m. ET: Stocks open mixed
Here were the main moves in markets as of 9:32 a.m. ET:
S&P 500 (^GSPC): +3.80 (+0.09%) to 4,135.73
Dow (^DJI): +80.64 (+0.24%) to 33,057.85
Nasdaq (^IXIC): -6.49 (-0.05%) to 12,328.15
Crude (CL=F): -$2.96 (-2.83%) to $101.73 a barrel
Gold (GC=F): -$48.30 (-2.53%) to $1,863.40 per ounce
10-year Treasury (^TNX): +7.2 bps to yield 2.9590%
7:43 a.m. ET Monday: Stock futures head for a higher open
Here’s where markets were trading Monday morning ahead of the opening bell:
S&P 500 futures (ES=F): +7.5 points (+0.18%) to 4,135.00
Dow futures (YM=F): +89 points (+0.27%) to 32,971.00
Nasdaq futures (NQ=F): +27.75 points (+0.22%) to 12,879.75
Crude (CL=F): -$2.95 (-2.82%) to $101.74 a barrel
Gold (GC=F): -$32.40 (-1.69%) to $1,879.30 per ounce
10-year Treasury (^TNX): +3.5 bps to yield 2.92%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.