The market is shifting gears ahead of Wednesday's key inflation report and in preparation for the start of the earnings season.

The Nasdaq 100 index of technology stocks fell, despite crypto-related startups rallying, as Bitcoin extended gains beyond $30,000. Large-cap companies fared relatively better. Treasury yields rose slightly. Investors assigned a 70% likelihood of a Fed rate hike next month. 

New York Federal Reserve President John Williams, who spoke Monday after the market close, said that "one more rate hike is a reasonable starting place" and added there is no evidence yet of a tightening of credit conditions.

Cues From Tuesday’s Trading:

The S&P 500 index was flat on the day, holding at about 4,100 points. The Dow Jones Industrial Average ticked higher by 0.4%, driven by gains in the industrials and health-care sectors. The tech-heavy Nasdaq 100 index slipped 0.6%, pulled down by Microsoft Corp. (NASDAQ:MSFT) and Amazon, Inc. (NASDAQ:AMZN), both of which fell more than 2%. 

Analyst Color:

Despite job growth showing some softness, the unemployment rate remains at 50-year lows, providing the Federal Reserve with plenty of room to “stay higher for longer” within their stated goals, said fund manager Louis Navellier.

Therefore, investors trying to time the market for a major rally from rate cuts in 2023 would probably be disappointed, he said. “A relief rally, however, when the Fed announces a pause in further cuts remains quite likely, though maybe short-lived, if unemployment does, in fact, start to rise from 3.5% to 4.5%,” he added.

If results and forecasts from companies confirm that earnings contraction has bottomed in the first quarter, what the Fed does matters less, Navellier said.

“Companies which retain pricing power and are addressing their cost structure will outperform indexes even if the Fed has to go even higher than expected to move closer to their objectives.”

Tuesday's Trading In Major US Equity ETFs: 

Latest Economic Data:

The National Federation of Independent Business reported that the Small Business Optimism Index edged down from 90.9 in February to 90.1 in March. 

The Treasury is due to auction three-year notes at 1 p.m. EDT.

Philadelphia Fed President Patrick Harker is scheduled to speak at 4 p.m. EDT.

The American Petroleum Institute (API) will report crude oil stock changes for the week ending April 7, at 4.30 p.m. EDT. 

Minneapolis Fed President Neel Kashkari is scheduled to speak at 7.30 p.m. EDT.

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Stocks In Focus:

CarMax, Inc. (NYSE:KMX) rose over 10% as the company reported earnings that significantly exceeded analyst estimates.

Whirlpool Corp. (NYSE:WHR) gained 4% after a Goldman Sachs analyst upgraded shares. 

Top Analysts’ Call

Commodities, Bonds, Forex And Other Global Equity Markets:

Crude oil resumed its rise, up 1.7%, with a barrel of WTI-grade crude trading at $81.2. The United States Oil Fund ETF (NYSE:USO) was 1.7% higher to $70.94 per share.  

Treasury yields rose slightly, with the 10-year yield returning to 3.45% and the two-year yield rising to 4.05%. The iShares 20+ Year Treasury Bond ETF (NYSE:TLT) was flat on the day. 

The dollar eased, with the U.S. dollar index up retracing 0.3%. The EUR/USD pair rose 0.4% to 1.09.  

The European equity indices were mostly in the green. The iShares MSCI Eurozone ETF (NYSE:EZU) was 0.3% higher.  

Gold rose 0.8% to $2,005/oz. The SPDR Gold Trust (NYSE:GLD) was 0.7% higher at $186.40. Silver rallied 1% to $25.11, with the iShares Silver Trust (NYSE:SLV) trading 0.9% higher to $23.09 per share. Bitcoin rose 2% to $30,246.

Staff writer Piero Cingari updated this report midday Monday.  

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