Stocks Fall As Dollar, Treasury Yields Jump On Upbeat Manufacturing Data, VIX Rallies: What’s Driving Markets Monday?

Stocks began the new month of April on a weaker note, as investors struggled to digest stronger-than-expected manufacturing data for March, amid concerns the Federal Reserve might postpone rate cuts.

The ISM Manufacturing PMI surged to 50.3 last month, up from 47.8 in February, surpassing expectations of 48.3 and marking the most robust expansion since September 2022.

Major US equity indices experienced slight declines, influenced by rising Treasury yields and a strengthening dollar.

The US dollar index reached its highest level since mid-November 2023, while yields on the 10-year Treasury note surged by over 12 basis points to 4.34%, aiming to close at their highest since early December 2023.

Bonds suffered losses, with the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) dropping by over 2%, as investors adjusted their expectations for a potential June rate cut. The probability of such an outcome decreased to 57%, down from nearly 70% the previous week.

Small-cap stocks were particularly affected due to their temperature sensitivity to interest rates, whereas tech stocks in the Nasdaq 100 managed to hold steady.

The Cboe Volatility Index (VIX) surged by 8%, indicating rising concerns among investors.

Despite the challenges posed by rising yields and a stronger dollar, commodities demonstrated resilience, buoyed by unexpectedly positive Chinese manufacturing activity. Gold prices reached $2,265 an ounce in overnight trading before retracting slightly to $2,240, while copper and oil prices rallied by over 1%.

Bitcoin (CRYPTO: BTC) experienced a loss of nearly 4% for the day, dropping below $69,000.

The SPDR S&P 500 ETF Trust (NYSE:SPY) was 0.2% lower to $522.04, the SPDR Dow Jones Industrial Average (NYSE:DIA) was down 0.6% to $395.32 and the tech-heavy Invesco QQQ Trust (NASDAQ:QQQ) was 0.1% higher to $444.53, according to Benzinga Pro data.

Sector-wise, the Energy Select Sector SPDR Fund (NYSE:XLE) outperformed, up 0.7%, while the Real Estate Select Sector SPDR Fund (NYSE:XLRE) was the laggard, down 1.4%.

• Micron Technology Inc. (NASDAQ:MU) rose by nearly 7%, notching the strongest performance among S&P 500 stocks, as Bank of America raised the company’s price target to $140.
• Chinese stocks experienced a notable surge in response to the stronger-than-expected PMI data: Baidu Inc. (NASDAQ:BIDU) saw a rise of 2.7%, PDD Holdings Inc. (NASDAQ:PDD) surged by 3.2%, Nio Inc. – ADR (NASDAQ:NIO) gained 2.1%, and Alibaba Group Holdings Inc. (NASDAQ:BABA) recorded a 1.1% increase.
• Crypto-related companies experienced losses amid declining Bitcoin prices. Marathon Digital Holdings Inc. (NASDAQ:MARA) fell more than 4% and Riot Platforms Inc. (NASDAQ:RIOT) was 5% lower.
• Casino and resort companies Wynn Resorts Ltd. (NYSE:WYNN) and Las Vegas Sands Corp. (NYSE:LVS) rose by 5.5% and 4.5%, respectively.

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