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NEW YORK (AP) — Wall Street is lower on Wednesday as stronger-than-expected economic data dampens expectations that interest rate relief will come soon.
The S&P 500 was down 0.7% in afternoon trading, falling for the second consecutive year after completing its 10th winning week in the past 11 weeks. As of 2:52 p.m., the Dow Jones Industrial Average was down 148 points, or 0.4%. Eastern time, the Nasdaq Composite was down 0.8%.
Rising bond market yields are once again putting downward pressure on stock prices.Yields rose after the report showed Sales at US retail stores Economic growth last month was stronger than economists expected. That’s good news for an economy that has defied recession predictions, but could continue to put upward pressure on inflation.
As a result, after raising interest rates sharply over the past two years, the Fed could be forced to wait longer than traders are expecting to begin cutting rates. Lower interest rates would ease pressure on the economy and financial system, while also reducing investment prices.
The 10-year Treasury yield jumped immediately after the retail sales report, rising to 4.10% from 4.06% late Tuesday and 3.85% a few weeks ago. Rising yields could weigh on corporate profits, while also reducing investors’ willingness to pay higher prices for stocks.
Rising yields have a negative impact on all types of investments, and high-growth stocks tend to be hit the hardest. Tesla, Apple and Amazon had the heaviest declines of more than 1% in the S&P 500 index. Small-cap stocks in the Russell 2000 index also fell more than the rest of the market, dropping 1.1%.
The Dow Jones Industrial Average, on the other hand, is less focused on high-tech and high-growth companies. This has allowed us to limit our losses compared to the rest of the market.
Two-year Treasury yields, which more accurately reflect expectations for the Fed, also rose. The rate rose to 4.36% from 4.22% late Tuesday as traders lowered expectations that the Fed’s first rate cut would occur in March. Traders are now betting the odds are 55%, down from a shade of more than 70% a month ago, according to CME Group data.
A senior Federal Reserve official said: Governor Christopher Wallersaid on Tuesday that the central bank could take its time before making its next move on interest rates, given how resilient the economy remains.
“These comments indicate that while a rate cut is on the table as early as March, such a step is not a done deal,” said Deutsche Bank economist Amy Yang. Ta.
Wednesday, across the Atlantic, President of the European Central Bank In his speech, he warned of the risk of cutting interest rates too soon.
If predictions about the timing of Wall Street’s desired rate cuts actually turn out to be wrong, it would be just the latest example of overzealousness by traders.
Interest rates are one of the main instruments that determine stock prices. Another is corporate profits, with multiple companies reporting weaker results than analysts expected on Wednesday.
US Bancorp fell 2.6% after reporting a profit that fell short of analysts’ expectations. Big 5 sporting goods fell 7.8% after the company said it expects losses for the final three months of 2023 to be worse than originally expected due to weak sales of winter products. They attribute this to rising temperatures in the west and lack of snowfall.
Charles Schwab reported its latest quarterly profit was stronger than analysts expected. However, the stock price still fell by 1.8%. Sales were lower than expected, but analysts said the better-than-expected earnings were likely due in part to the easing of tax rates.
spirit airlines It came under heavy pressure again, falling 24.2%. JetBlue’s stock price nearly halved a day earlier after a U.S. judge blocked the acquisition by JetBlue Airways over concerns it would lead to soaring airfares. JetBlue fell 8.3%.
Wednesday’s weakness on Wall Street followed a tough day for financial markets around the world. Stock indexes in Europe fell by more than 1% after European Central Bank President Christine Lagarde’s comments.
In Asia, the decline was even more rapid. Stocks fell 3.7% in Hong Kong and 2.1% in Shanghai as concerns continued over the slow recovery of the world’s second-largest economy.
Japan’s Nikkei Stock Average, which has been the biggest gainer of the new year, also fell, dropping 0.4%.
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AP Business writers Yuri Kageyama and Matt Ott contributed.
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