① With Nvidia's round of mini-dives at the end of the session, dragging down the US stock market for the third consecutive trading day, the trend in the US market seems to be undergoing a subtle shift before the Easter holiday; ② As the end of the month approaches, institutional investors such as pension funds have also accelerated the pace of rebalancing their portfolios.
Financial Services Association, March 27 (Editor: Xiaoxiang) With Nvidia's late round of mini-diving, which dragged the US stock market to close down for the third consecutive trading day, the trend in the US market seems to be undergoing a subtle shift before the Easter holiday. As the end of the month approaches, institutional investors such as pension funds have also accelerated the pace of rebalancing their investment portfolios.
Market data showed that the three major US stock indexes generally fell slightly on Tuesday. Among them, the S&P 500 index fell 0.3%, and the Nasdaq index, which is concentrated in technology stocks, fell 0.4%. The Dow also fell by about 31 points, or 0.1%.
Many industry insiders speculate that the recent adjustments in US stocks may be related to the traditional end-of-quarter rebalancing effect — the S&P 500 index has already risen by more than 9% in the first three months of this year, while US bond prices have been under pressure.
According to Morgan Stanley's estimates, due to excellent stock performance, pension funds will need to sell about $22 billion in global stocks and buy $17 billion in fixed income assets at the end of the quarter to restore the position ratio to the previous level.
Not surprisingly, from November of last year to March of this year, the S&P 500 index is expected to rise for 5 consecutive months. Now, some traders are discussing whether the upward path will become more rugged since stock valuations are still historically high.
Piper Sandler's Craig Johnson said, “As momentum slows down and dispersion increases, we think the S&P 500 index may move closer to its 50-day moving average (this level was last tested in early November), showing at least 5% but still a healthy pullback.”
Thomas Martin, senior portfolio manager at Globalt Investments, also pointed out that investors are generally not worried about a sharp correction in the stock market. Although analysts are usually wary when the market is too optimistic, he believes that the market base is strong and there is more room for further growth.
In the US bond market, US bond yields generally declined slightly on Tuesday as purchases near the end of the month were strong. Demand for the $67 billion five-year treasury bond bid was strong on that day. Meanwhile, traders are waiting for key inflation data to be released later this week to determine when the Federal Reserve may start cutting interest rates.
By the end of the New York session, 2-year US Treasury yields fell 3.5 basis points to 4.603%, 5-year US Treasury yields fell 0.7 basis points to 4.226%, 10-year US Treasury yields fell 1.1 basis points to 4.237%, and 30-year US Treasury yields fell 1.7 basis points to 4.4%.
US bond yields rose slightly earlier overnight. An earlier report from the US Department of Commerce showed that durable goods orders rebounded in February. This is another sign of the resilience of the US economy, which boosted the prospects for economic growth in the first quarter. The report suggests that the US manufacturing industry may now be regaining its foothold.
However, strong demand for US bond tenders continued to weigh on yields, and there has been a marked decline in yield since then. The bid interest rate for the $67 billion five-year Treasury note sold by the US Treasury on Tuesday was 4.235%, about 0.7 basis points lower than the yield for the same period in the secondary market at the end of the tender.
Tom Simons, senior economist at Jefferies, pointed out, “We are nearing the end of the month, and Friday is another holiday. This may accelerate some purchases and may also stimulate more bid purchases rather than trying to find some valuable investments later.”
Many investors are also currently waiting for the personal consumption expenditure (PCE) price index to be announced on Friday to see if the Fed will start cutting interest rates in June. According to CME's FedWatch tool, the possibility that the Fed will cut interest rates in June is still over 70%.
Gennadiy Goldberg, head of US interest rate strategy at TD Securities, said, “The market is still waiting for clear signs of slowing inflation. This is the reason for the fluctuation in yield trends. Traders are watching every data point — whether it's critical or not, to try to assess where interest rates are going next.”
Editor/Somer