Dow Jones futures fall more than 100 points as recession continues

US stocks are bracing for losses on Tuesday, signaling another day of recession as health care insurers decline and investors face the prospect that interest rate cuts will come later than hoped.

Dow Jones Industrial Average (^DJI) futures fell 0.4%, or 160 points, pulling the blue-chip index back from trying to reach the key 40,000 level. S&P 500 futures (^GSPC) fell 0.3%, while futures on the tech-heavy Nasdaq 100 (^NDX) fell 0.4%.

US bonds continued to struggle, with the yield on the benchmark 10-year Treasury note (^TNX) rising to around 4.36%, hovering near 2024 highs.

Stocks got off to a lackluster start to the second quarter after hitting a series of records in the first months of 2024. Hotter-than-expected manufacturing readings gave weight to growing doubts that the Fed will cut interest rates in the first half of the year. With the US economy showing surprising resilience.

An update to jobs data later Tuesday should provide food for thought in the countdown to Friday's jobs report, a key input into the Fed's decision-making process. The market will also listen to comments from Fed officials Michele Bowman, Loretta Mester and Mary Daly for clues on whether the inflation problem could derail the three planned interest rate cuts.

Shares of health insurance companies fell on the markets early Tuesday, after US regulators surprised the industry by failing to increase payments to private Medicare plans as usual. Humana (HUM) shares are down about 9%, while CVS (CVS) shares are down about 6%.

He lives2 updates

Tuesday 2 April 2024 at 12:49 PM GMT+1

Consumer stocks in focus as gas prices rise

Stocks leveraged for consumer spending could become ice cold this spring.

Oil prices reached $85 a barrel this morning, the highest level in five months. The advance in oil prices – which may be starting to impact the broader market – has lit a fire under gas prices nationwide. The national average of $3.51 per gallon last week was unchanged week over week — that's after prices rose for four straight weeks.

Even so, gas prices are 16 cents higher than they were a month ago.

“While we appear to be approaching a peak in the short term, one word of caution for those living in the mid-Atlantic and Northeast: You're not quite done switching to summer gasoline yet, so you may be in for a bit of a shock in a few weeks.” Be prepared for some hit. . For the rest of the country, as long as we don't see extenuating circumstances, we will likely be close to peak prices. Let's hope it works out and continues!” Patrick de Haan, head of petroleum analysis at GasBuddy, said in a new blog mail.

As gas prices rise, the Consumer Discretionary Sector SPDR Fund (XLY) fell 1.4% in the past month – perhaps on concerns about consumer spending. The fund's major discretionary retailers such as Amazon (AMZN), Starbucks (SBUX), and Nike (NKE) underperformed the S&P 500 last month.

Interestingly, Walmart (WMT) stock is up 2% in the past month as investors view the retailer as a bear trade due to rising gas prices.
Tuesday 2 April 2024 at 12:30 PM GMT+1

Health insurance stock tank

Health insurance stocks will be sent to patients' beds on Tuesday.

Humana (HUM) is drilling 9% ahead of market, with pressure also seen on UnitedHealth Group (UNH) and Cigna (CI). The sell-off comes as US regulators have failed to increase payments to Medicare Advantage plans in line with Wall Street estimates.

Payments are expected to rise by 3.7% on average in 2025, down about 0.2% year over year.

This came as a “surprise,” as many on the Street had expected an increase “given the usage environment,” Lisa Gill, a longtime health care analyst at JPMorgan, said in a client note.

Humana is seen as most vulnerable to the decision from the Centers for Medicare and Medicaid Services.

Key appeal of Humana Latest annual report:

“At December 31, 2023, we provided health insurance coverage under CMS contracts to approximately 5,408,900 individual members of Medicare Advantage, including approximately 851,300 members in Florida. These Florida contracts accounted for approximately $14.9 billion in premium revenue, which “This represents approximately 19% of our individual Medicare Advantage premium revenue, or 14% of our consolidated premium and services revenue for the year ending December 31, 2023.”

RBC analyst Ben Hendricks said in a note this morning that Humana's earnings guidance will have to be reset in the wake of the decision and the stock may remain under pressure. Conversely, Hendricks recommends clients buy Cigna stock on a pullback.