US close: Stocks finished mixed after Powell urges patience on rate cuts

US stocks finished mixed on Tuesday after bond yields climbed on the back of comments from Federal Reserve chair Jerome Powell, who said the central bank needed more confidence that inflation was on a downward trend before cutting interest rates.

The Dow snapped a five-day losing streak to finish 0.2% higher at 37,799, bouncing back after finishing at a three-month low the previous session. However, the S&P 500 fell 0.2% to 5,051 and the Nasdaq lost 0.1% to 15,865.

The 10-year US Treasury yield was up 6.4 basis points at 4.672%, its highest level in five months, after Powell said recent economic data – such as three straight months of stronger-than-forecast inflation – "have clearly not given us greater confidence and instead indicate that it is likely to take longer than expected to achieve that confidence".

In a shift in tone compared with recent comments, the Fed chair pushed back on market expectations for two or three rate cuts in 2024 – projections that were discussed by Fed officials at their latest meeting. "Right now, given the strength of the labour market and progress on inflation so far, it’s appropriate to allow restrictive policy further time to work," he said.

Also weighing on sentiment were rising tensions in the Middle East after Israel said it had no choice but to respond to Iran's 300-plus missiles and drones that were launched at the weekend. The initial muted reaction to Tehran's attack had a similarly subdued impact on the markets on Monday, though fears were rising of a reprisal. "Missiles into the territory of the State of Israel will be met with a response," said Herzi Halevi, chief of staff of the IDF.

On the macro front, builders broke ground on fewer new homes last month than anticipated. According to the Department of Labor, in seasonally adjusted terms, housing starts dropped at a month-on-month pace of 14.7% in March to reach an annual rate of 1.32m (consensus: 1.48m). Permits, meanwhile, which were considered to be a lead indicator for starts, dropped by 4.3% to 1.45m (consensus: 1.51m).

On another note, the US capacity utilisation rate edged up to 78.4% in March, up from a downwardly revised 78.2% print for February, according to the Federal Reserve, while industrial production flattened year-on-year in March, following a downwardly revised 0.3% drop in February.

Market movers

Shares in banking giant Morgan Stanley rose 2.5% after the company beat forecasts with a 13% increase in first-quarter profits. Net income came in at $3.4bn for the first three months of the year, up from $3.0bn a year earlier, with earnings per share rising to $2.02 from $1.70, ahead of the $1.67 expected by analysts.

Heading the other way was sector peer Bank of America, dropping 3.5% after posting a sharp fall in profits. First-quarter net income at the US lender dropped to $6.7bn from last year’s $8.2bn.

UnitedHealth jumped 5% following the health insurer's better-than-expected first-quarter revenues, as investors shrugged off a $1.6bn potential hit from the hack of its Change Healthcare division.

Healthcare and pharma titan Johnson & Johnson was down 2% despite the company topping forecasts with its adjusted earnings on the back of surging medical device sales.

Dow Jones - Risers

Unitedhealth Group Inc. (UNH) $468.89 5.22%
Salesforce.Com Inc. (CRM) $277.43 1.65%
Boeing Co. (BA) $170.55 1.63%
International Business Machines Corporation (CDI) (IBM) $183.81 1.38%
Travelers Company Inc. (TRV) $223.12 0.93%
Walt Disney Co. (DIS) $113.89 0.82%
Procter & Gamble Co. (PG) $155.95 0.32%
Nike Inc. (NKE) $93.39 0.31%
Microsoft Corp. (MSFT) $414.58 0.23%
Amgen Inc. (AMGN) $265.64 0.05%

Dow Jones - Fallers

Johnson & Johnson (JNJ) $144.45 -2.13%
Apple Inc. (AAPL) $169.38 -1.92%
JP Morgan Chase & Co. (JPM) $180.80 -1.14%
Caterpillar Inc. (CAT) $359.88 -1.11%
Goldman Sachs Group Inc. (GS) $396.86 -1.00%
Home Depot Inc. (HD) $334.92 -0.92%
Merck & Co. Inc. (MRK) $125.06 -0.90%
Verizon Communications Inc. (VZ) $39.77 -0.85%
Chevron Corp. (CVX) $156.28 -0.83%
Dow Chemical Co. (DOW) $56.86 -0.80%

S&P 500 - Risers

Globe Life Inc. (GL) $59.97 7.45%
Unitedhealth Group Inc. (UNH) $468.89 5.22%
VF Corp. (VFC) $12.57 3.46%
Coty Inc. Class A (COTY) $10.83 3.14%
Lamb Weston Holdings, Inc. (LW) $82.06 2.64%
Charles Schwab Corp. (SCHW) $73.07 2.58%
Morgan Stanley (MS) $89.14 2.47%
KLA-Tencor Corp. (KLAC) $693.31 2.18%
Advance Auto Parts (AAP) $71.61 2.18%
Zoetis Inc (ZTS) $153.02 2.17%

S&P 500 - Fallers

Albemarle Corp. (ALB) $114.11 -5.30%
Northern Trust Corp. (NTRS) $79.56 -4.96%
Nektar Therapeutics (NKTR) $1.50 -4.78%
Gap Inc. (GPS) $20.98 -4.11%
Bank of America Corp. (BAC) $34.68 -3.53%
American Tower Corp (Reit) (AMT) $172.23 -3.32%
Hologic Inc. (HOLX) $75.11 -3.13%
Vornado Realty Trust (VNO) $25.38 -3.02%
Universal Health Services Inc. (UHS) $161.41 -3.01%
CenturyLink Inc. (LUMN) $1.33 -2.92%

Nasdaq 100 - Risers

Asml Holdings N.V. (ASML) $976.92 2.31%
KLA-Tencor Corp. (KLAC) $693.31 2.18%
O'Reilly Automotive Inc. (ORLY) $1,089.51 1.89%
Applied Materials Inc. (AMAT) $209.48 1.85%
Lam Research Corp. (LRCX) $963.23 1.80%
Netflix Inc. (NFLX) $617.52 1.71%
Nvidia Corp. (NVDA) $874.15 1.64%
Broadcom Inc. (AVGO) $1,329.06 1.40%
Adobe Systems Inc. (ADBE) $476.22 1.30%
Monster Beverage Corp (MNST) $54.69 1.07%

Nasdaq 100 - Fallers

Hologic Inc. (HOLX) $75.11 -3.13%
Illumina Inc. (ILMN) $117.69 -2.86%
Tesla Inc (TSLA) $157.11 -2.71%
Liberty Global plc Series A (LBTYA) $16.33 -2.68%
Liberty Global plc Series C (LBTYK) $16.91 -2.65%
Ulta Salon, Cosmetics & Fragrance Inc. (ULTA) $424.17 -2.09%
Apple Inc. (AAPL) $169.38 -1.92%
NetEase Inc. Ads (NTES) $90.42 -1.90%
JD.com, Inc. (JD) $25.06 -1.42%
Mercadolibre Inc. (MELI) $1,397.88 -1.27%