NEW YORK (AP) – In the latest example of how good news for the economy can be bad for Wall Street, the market on Thursday came as a strong economic report raised the possibility that interest rates would remain painfully high. , most US stocks fell. The weakness has spread over a wide area, and the shadow has become thinner. Another explosive profit report From market giant Nvidia.
The S&P 500 fell 0.8% in afternoon trading, further shying away from the record it hit earlier this week. As of 2:30 p.m. Eastern time, the Dow Jones Industrial Average was down 623 points, or 1.5%, and the Nasdaq Composite was down 0.4%.
Stock markets were suffering from the pressure of rising bond market yields. A stronger-than-expected U.S. economic report has put pressure on Treasury yields, forcing traders to reconsider when the Federal Reserve can provide relief to financial markets through lower interest rates.
A preliminary report suggested that U.S. business activity was growing at its fastest rate in more than two years. S&P Global said in the report that growth had improved not only in the services sector but also in battered manufacturing companies.
Meanwhile, a separate report showed the U.S. job market remains strong despite high interest rates. Fewer workers apply for unemployment insurance Last week’s benefits were higher than economists expected, showing that layoffs remain relatively low.
Yields on government bonds were almost flat after the unemployment rate report, but started rising immediately after the business activity report, suggesting that selling prices remain high.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said that there is current upward pressure on inflation from both manufacturing and services, and that “the last mile to the Fed’s 2% target is still in progress.” This suggests that it is difficult to see.
The Fed is trying to accomplish the difficult feat of slowing the economy through high interest rates just enough to bring inflation under control, but not so much as to force a painful recession. To that end, it has kept key interest rates at the highest levels in more than 20 years, and Wall Street is hoping for some relief.
If the economy performs better than expected, the Fed could delay cutting interest rates, even as traders are already holding off on cuts. Previous overly optimistic predictionsEven worse, the Fed may eventually be forced to raise interest rates even further, potentially triggering a deep recession in order to completely quell inflation.
Expectations remain high for at least one rate cut this year. However, traders withdrew some of those bets after Thursday’s report.
The yield on 10-year government bonds is mortgage interest rate and other loans rose to 4.47% from 4.43% late Wednesday. The yield on the two-year Treasury note, which more accurately reflects expectations for Federal Reserve action, rose to 4.93% from 4.87%.
That has led to some of the biggest declines in the market for utility and real estate stocks. When interest rates are high, bonds pay more interest, which could scare away income-seeking investors who would otherwise buy utilities and real estate investment trusts for their high dividends.
American Water Works fell 3.6% and Boston Properties dropped 3.5%.
The steepest decline in the S&P 500 index was live nation entertainmentThe company fell 8.2% after the Justice Department accused it and its Ticketmaster business of having an illegal monopoly on live events in the country.
VF Corp., whose brands include The North Face, Vans and Timberland, saw its stock fall 3.5% after reporting weaker-than-analyst revenue and a loss in its latest quarter. .
That more than offset a 9.3% surge from Nvidia, which posted its latest jaw-dropping profit report late Wednesday. The company’s latest quarterly revenue rose 262% year over year, while profits grew a staggering 629%. The company’s chips help train artificial intelligence systems, There is a strong demand for them.
Nvidia also increased its dividend after CEO Jensen Huang touted that “the next industrial revolution has begun.”
There have been growing concerns that Wall Street’s enthusiasm about AI’s potential is creating a bubble that’s driving prices too high and expectations too stringent. But Nvidia’s continued rapid growth has calmed some of the criticism.
Overseas stock indexes were mixed in Europe and Asia. Japan’s Nikkei rose 1.3%, helped by gains from semiconductor companies after Nvidia’s strong earnings report. Indexes fell 1.7% in Hong Kong and 1.3% in Shanghai amid questions about whether new policies to support China’s ailing real estate sector will be enough to end the industry’s crisis.
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AP Business Writers Yuri Kageyama, Matt Ott and Alex Veiga contributed.
