NEW YORK (AP) — U.S. stocks fell Wednesday, paring gains in May that were on track to be Wall Street’s best month in six months.
The S&P 500 was down 0.5% in afternoon trading, down from the record high it reached last week. The Dow Jones Industrial Average was down 343 points, or 0.9%, as of 12:41 p.m. ET, and the Nasdaq Composite was down 0.3%, a day after hitting a record high.
American Airlines Group Inc. led airline stocks lower after it cut its outlook for spring profit and other financial targets. The airline said fuel costs may be slightly lower than previously thought, but key revenue trends are likely to be lower as well. It also announced that Chief Commercial Officer Vas Raja would leave the company. Shares fell 14.3%.
ConocoPhillips fell 3.9% after it said it would buy Marathon Oil in an all-stock transaction valuing the company at $22.5 billion, including $5.4 billion in net debt. The deal is the latest in a string of recent big acquisition announcements in the industry. Marathon Oil rose 8%.
Advance Auto Parts Inc. fell 9.1 percent after its latest quarterly results and revenue fell slightly short of analysts’ expectations and the company said the industry had gotten off to a slower-than-expected start to the year.
Further increases in longer-term Treasury yields also weighed on the broader stock market, with the 10-year Treasury yield rising to 4.62% from 4.54% late Tuesday. Though still falling this month, it has been gradually climbing since dropping below 4.40% in mid-May.
Rising Treasury yields can drive down the prices of all kinds of investments, but they can especially hit utility and real estate stocks. Higher bond yields could scare away income-seeking investors who might buy these stocks for their relatively high dividends.
Utilities in the S&P 500 fell 1.5% overall, while real estate investment trusts dropped 0.9%, the biggest losers in the market.
The movement in Treasury yields this month came as traders recalibrated their expectations about when the Federal Reserve will start cutting its key interest rate, which is at its highest in more than two decades.
Wall Street is always eager for interest rate cuts because they can boost investment prices and take some of the downward pressure off the economy. But traders have had to postpone overly optimistic predictions about rate cuts multiple times this year as inflation has proven completely unchecked.
The Fed is trying to strike a balance between squeezing the economy with interest rates high enough to completely contain inflation, but not so much that it leads to widespread layoffs.
Despite concerns that cracks are appearing in spending among U.S. consumers, particularly lower-income earners, economists at BNP Paribas expect a healthy job market, slowing inflation and even gains from some cryptocurrency investors to bolster the economy’s main engine.
“American consumers have defied the pressures of high interest rates and inflation, as well as fears about economic uncertainty,” said Elena Shulyatyeva, senior U.S. economist at BNP Paribas.
The U.S. stock market continues to break records despite concerns about interest rates remaining high, in part due to the continued rise in artificial intelligence technology stocks. Nvidia’s latest eye-opening earnings report helped to add to the enthusiasm, but the momentum won’t last forever. The company’s shares fell in morning trading before easing back to a modest 0.4% gain, the lowest since the company reported earnings a week ago.
Dick’s Sporting Goods Inc. was a winner on Wall Street, sending shares up 15.8% after its most recent quarterly profit and sales beat analysts’ expectations. The company also raised its full-year profit forecast.
Chewy, the online pet supplies retailer, also reported better-than-expected profits for its most recent quarter, sending its shares up 29.4%. The company also said it would return up to $500 million to shareholders through share buybacks.
On the international market front, Asian and European stock indexes were mostly lower: Hong Kong’s Hang Seng Index fell 1.8%, South Korea’s KOSPI dropped 1.7% and France’s CAC 40 fell 1.5%.
Shanghai stocks were little changed after the International Monetary Fund upgraded its economic outlook for China, predicting the world’s second-largest economy will grow at a 5 percent annual rate this year, but the IMF also warned that consumer-friendly reforms were needed to sustain strong, high-quality growth.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
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