US Stocks Drift Lower As Dollar, Treasury Yields Rise, AMD Defies Gravity: What's Driving Markets Tuesday?

The U.S. stock market resumed its decline on Tuesday following a one-day closure for Martin Luther King Jr. Day. The major indices were all in the red around midday trading in New York as investors continue to monitor corporate earnings season and prospects for future interest rates.

The S&P 500 slipped by 0.5%, while the tech-heavy Nasdaq 100 limited its losses to 0.4%, buoyed by the semiconductor sector, with Advanced Micro Devices Inc. AMD shining with a 7% gain.

Both the Dow Jones and the Russell 2000 underperformed, as both large and small-cap stocks bore the brunt of a strengthening U.S. dollar and rising Treasury yields.

The U.S. Dollar Index (DXY), tracked through the Invesco DB US Dollar Bullish Fund UUP, reached levels last seen more than a month ago, as Fed Governor Christopher J. Waller pushed back against market expectations of a Fed rate cut in March.

“With economic activity and labor markets in good shape and inflation gradually coming down to 2%, I see no reason to move as quickly or cut as rapidly as in the past,” Waller said in his prepared remarks. He indicated that his view aligns with the Fed policymaker projections for three 25-basis-point rate cuts in 2024.

Treasury yields soared across all key maturities. The 30-year yield surged to 4.32%, the highest in a month, with the iShares 20+ Year Treasury Bond ETF TLT tumbling 2%, its worst session in more than two months.

Gold also fell 1.4% to $2,026/oz hit by stronger dollar and yields, while Bitcoin BTC/USD was 1.4% higher to $43,100.

Tuesday’s Performance In US Major Indices, ETFs

The SPDR S&P 500 ETF Trust SPY fell 0.5% to $474.15, the SPDR Dow Jones Industrial Average DIA inched 0.7% down to $373.17 and the tech-heavy Invesco QQQ Trust QQQ was 0.3% lower to $408.12, according to Benzinga Pro data.

Sector-wise, all 11 S&P 500 sectors recorded losses, with the Energy Select Sector SPDR Fund XLE underperforming, down 1.9%, as oil and natural gas prices moved lower. The Consumer Discretionary Select Sector Fund XLY and the Technology Select Sector Fund XLK trimmed losses, both down 0.3%.

On an industry level, the VanEck Semiconductors ETF SMH rose 1.2%. Gold miners, as tracked by the VanEck Gold Mining ETF GDX, tumbled 4.7%

Tuesday’s Stock Movers

• AI-related stocks surged higher Tuesday after KeyBanc Capital Markets signaled a bullish outlook on semiconductor demand, particularly for chips that drive AI technologies. Shares of AMD were 7% higher, while NVIDIA Corp. NVDA rose 2.7%
• Synopsys Inc. SNPS saw its shares rise by 1.7% following the announcement of its agreement to acquire ANSYS Inc. ANSS in a cash transaction valued at $35 billion. ANSYS fell by 5.9%. According to the terms released by the companies, shareholders of ANSYS will be compensated with $197 in cash and 0.345 shares of Synopsys stock for each share they hold in ANSYS.
• Boeing Co. BA fell nearly 8%, after the company named an independent advisor to lead a comprehensive quality review of its aircraft.
• Shares of Coherent Corp COHR surged by 8% as Barclays shifted its outlook on the company, upgrading its rating from Equal Weight to Overweight while raising the price target from $38 to $60.

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