Stan Cho, Associated Press
16 minutes ago
People walk in front of the New York Stock Exchange on Wednesday, April 3, 2024 in New York. Healthcare business Solventum began trading on the New York Stock Exchange on Wednesday. (AP Photo/Peter Morgan)
NEW YORK (AP) — U.S. stock indexes held firm Wednesday after their worst day in weeks.
The S&P 500 rose 0.2% in morning trading, slightly reversing the previous day’s 0.7% decline. As of 10:10 a.m. ET, the Dow Jones Industrial Average was up 64 points, or 0.2%, and the Nasdaq Composite was up 0.1%.
Calmaine Foods rose 6% after reporting better-than-expected profits for its latest quarter after selling a record number of eggs. Meanwhile, Intel fell 6.2% after the company disclosed for the first time financial details for key parts of its business, including its loss-making foundry business.
Stock prices have generally slowed their rise since rising 26% from November to March. The strong recovery in the U.S. economy has raised concerns that the Federal Reserve will not be able to cut interest rates as much this year as originally hoped. Critics also argue that, at the very least, the pullback was premature, as the stock has become overvalued by many measures.
The Fed has indicated it could cut its key interest rate three times yet this year. Reducing key interest rates from their highest levels since 2001 would provide relief to the economy and financial system, while also boosting investment prices. But Fed officials have said they will only begin cutting rates when they see more evidence that inflation is falling toward their 2% target.
Several recent economic reports have been stronger than expected. Such strength is encouraging for Wall Street. That’s because it means the economy continues to avoid recession, which should support corporate profits. But it could also increase upward pressure on inflation and deter the Fed from cutting rates.
Traders were encouraged by a report Wednesday morning showing construction, retail and other U.S. services continued to grow last month, but not as much as economists had expected. Perhaps more importantly, the Institute for Supply Management’s report also states that the price paid index is at its lowest level since March 2020. This is an encouraging trend for inflation.
This followed a morning report showing stronger-than-expected private sector employment growth. The report from the ADP Institute suggests that employers accelerated hiring last month, when economists were predicting an economic slowdown.
A more comprehensive report on the March job market is expected to be released by the U.S. government on Friday, and is likely to be the main economic indicator this week.
Traders have already sharply lowered their expectations for how many rate cuts the U.S. Federal Reserve will cut this year, halving them from the six they expected at the start of the year. The Fed may not want to start cutting rates too close to the November election for fear of being seen as political, leading some to prepare for two or no rate cuts this year.
Yields rose in the bond market, putting pressure on stocks. The yield on the 10-year Treasury note rose to 4.39% from 4.36% late Tuesday. The gains were pared after a weaker-than-expected report on the U.S. services industry.
The yield on the two-year note, which is more closely tied to Fed expectations, rose to 4.71% from 4.70%.
Rising oil prices are also adding to inflationary pressures. Benchmark U.S. crude oil rose 0.9% to $85.78 per barrel, rising nearly 20% year-to-date. Brent crude oil, the international standard, has risen as well, rising more than 16% so far in 2024.
In overseas stock markets, European indexes were mixed, with small movements. Inflation in Europe cooled more than expected in March, according to a report, but analysts said that may not be enough to prompt the European Central Bank to raise its first interest rate cut.
Asian markets fell more sharply earlier in the day, following Wall Street’s decline from Tuesday. The index fell 1.7% in Seoul, 1% in Tokyo and 1.2% in Hong Kong.
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AP Business writers Yuri Kageyama and Matt Ott contributed.
