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By Stan Choe AP Business Writer
New York (AP) — Most U.S. stocks are weakening Tuesday, as continued worries about high interest rates compete with strong profit reports from some big companies. news online
The S&P 500 was 0.3% lower in morning trading, coming off a sharp loss after bending under the pressure from a jump in Treasury yields. The Dow Jones Industrial Average was up 77 points, or 0.2%, as of 10:45 a.m. Eastern time, and the Nasdaq composite was 0.2% lower.
A 5.3% climb for UnitedHealth helped support the market after the insurer reported stronger results for the first three months of the year than analysts expected. Morgan Stanley was another winner, rising 3.8%, after likewise topping expectations.
But the majority of stocks on Wall Street were falling. Northern Trust slumped 3.1% after the financial services company reported weaker earnings than analysts expected. Johnson & Johnson sank 1.2% despite topping profit forecasts. Its revenue came in a whisper below expectations.
Companies are under even more pressure than usual to report fatter profits and revenue because the other lever that sets stock prices, interest rates, looks unlikely to add much lift soon.
Traders are pushing out forecasts for when the Federal Reserve will begin cutting its main interest rate, which is at the highest level in more than two decades. A string of reports showing inflation and the overall economy remain hotter than forecast is raising worries the Fed will have to keep rates high for much longer than expected to get inflation fully back to its 2% target.
After jumping Monday on stronger-than-expected data on sales at U.S. retailers last month, Treasury yields rose again following a speech by the vice chair of the Federal Reserve.
Philip Jefferson said his expectation is for inflation to keep easing and for the Fed to hold its main rate “steady at its current level.” That contrasts with what he said in February, when he said “it will likely be appropriate to begin dialing back policy restraint at some point this year” if things went as he expected.
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Fed Chair Jerome Powell will also be speaking in the afternoon, and that could send more swings through financial markets as traders trim their forecasts for how many cuts to rates may arrive this year. After coming into 2024 expecting the Fed to cut rates six times or more, according to data from CME Group, traders are now mostly calling for just one or two reductions.
The yield on the 10-year Treasury climbed to 4.66% from 4.61% late Monday and from 4.52% before the weekend.
The yield on the two-year Treasury, which more closely tracks expectations for Fed action, rose to 4.95% from 4.91% late Monday.
On Wall Street, stocks that tend to swing the most with interest rates were leading the market lower.
The sharpest losses in the S&P 500 hit real-estate investment trusts and utility stocks. They pay relatively high dividends and tend to attract the same kind of investors as bonds do. When bond are paying higher yields, income-seeking investors may camp there instead.
The stock of Donald Trump’s social-media company also slumped again. Trump Media & Technology Group fell another 10.4% to follow up on its 18.3% slide from Monday.
The company said it’s rolling out a service to stream live TV on its Truth Social app, including news networks and “other content that has been cancelled, is at risk of cancellation, or is being suppressed on other platforms and services.”
The stock has dropped below $24 after nearing $80 last month as euphoria fades around the stock and the company made moves to clear the way for some investors to sell shares of the company’s stock.
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In stock markets abroad, indexes tumbled across Asia and Europe as they caught up with the drubbing Wall Street took on Monday. Stock indexes fell 2.1% in Hong Kong, 2.3% in Seoul and 1.9% in London.
AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
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Notes from APS Radio News
Reportedly because of what was being called a “pandemic”, a number of the world’s central banks embarked on massive programs of monetary expansion, starting in late February and early March of 2020.
For its part, between the early part of March of 2020 to over a year later, the US Federal Reserve added over $4 trillion to its holdings, by purchasing billions of dollars’ worth of Treasury bonds and corporate bonds each month during that period.
As well, at that time it kept interest rates rather low.
Other central banks, including the Bank of Japan and the European Central Bank, followed similar policies.
In addition, during that period many countries engaged in lockdowns; many small and medium-sized businesses and enterprises were shuttered by way of orders issued by public health officials, politicians and various administrators.
One of the direct causes of those shutdowns was the development of shortages.
According to a number of economists, the combination of shortages of various goods and services and massive programs of “quantitative easing” led to substantially higher rates of inflation.
In consequence of shuttered economies and higher rates of inflation in the first world, less developed countries suffered greatly, due, in part, to shortages of supplies and due to lowered demand.
For some time, in its articles about China, The Wall Street Journal has pointed to “covid” related lockdowns as being one of the major causes of China’s downturn in its economy.
In the US, by October of 2020, over 100,000 businesses had been shuttered by way of lockdowns.
Recently it was reported that before February of 2020 it had been recognized that there was shortfall of funds for interbank lending or for repurchases of short-term loans.
Since the financial crisis of 2008, the Federal Reserve has supplied those funds, in the context of “quantitative easing” or its purchases of mortgage-backed security and government bonds.
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