The S&P 500 and Nasdaq posted big gains on Tesla earnings

New data released on Tuesday revealed a sign that the US economy may be losing steam.

S&P Global's Flash US Composite PMI, Both the services and manufacturing sectors recorded activity at 50.9 in April, a four-month low. April's print was down from the 52.1 reading seen in March and below economists' expectations for 52.

Chris Williamson, chief business economist at S&P Global Market Intelligence, told Yahoo Finance that a composite above 50 indicates the economy still grew in April. But the decline from previous months shows “a slight wobble” for economic activity to begin in the second quarter.

“It will be interesting to see how it continues,” Williamson said. “But certainly, the second quarter so far has not been as strong as the first quarter, which I think is in line with most people's expectations. It's been a good start to the year, [and now it’s] Loses some momentum.”

After beating A 20-month high in January, overall business confidence took a hit, hitting its lowest level since November. Also the April report It showed a decline in new orders for the first time in six months, while companies cut employment for the first time in nearly four years.

Williamson noted that lower business expectations for the coming year could be affected by the changing narrative around monetary policy. In January, as business confidence soared, markets priced in a range of six or seven interest rate cuts from the Federal Reserve this year. Since then, expectations have shifted, with consensus expecting two interest rate cuts in 2024, according to Bloomberg data.

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That boosted Treasury yields, with the 10-year Treasury yield ( ^TNX ) up nearly 80 basis points since early February. That, Williamson noted, could tighten financial conditions and weigh on sentiment.

“If you like the demand environment in light of this new rate environment, demand has pulled back a bit with the rebalancing,” Williamson said.

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