NEW YORK (AP) — U.S. stocks are lower Thursday, a day after falling on concerns that interest rates will remain high for some time.
The S&P 500 was little changed in intraday trading, down 0.9%. As of 11:40 a.m. ET, the Dow Jones Industrial Average was down 165 points, or 0.4%, and the Nasdaq Composite was up 0.4%.
In the bond market, which drives much of Wall Street’s movement, mixed U.S. Treasury yields continue to put pressure on the stock market. The index was weak in the morning, but has since recovered on mixed data on the U.S. economy and speculation about when the European Central Bank will cut interest rates. Key interest rates remained unchanged after the meeting in Germany.
When, or if, the Federal Reserve will cut U.S. interest rates that traders desperately want is one of the key questions dominating Wall Street. Traders had expected at least six rate cuts this year, but have since sharply scaled back their expectations. Concerns are growing that inflation progress over the past year is stalling after a series of hotter-than-expected reports on inflation and the economy. Many traders now expect just two rate cuts in 2024, with some even discussing the possibility of zero.
Thursday morning’s report showed that wholesale-level inflation was slightly lower than economists expected last month. While this is encouraging, it also shows that the underlying trend in inflation is either close to or slightly above expectations. These numbers remove the impact of notoriously high fuel and other prices, which economists say gives a better picture of where inflation is heading.
Chris Larkin, managing director of trading and investments at E-Trade, said the latest information does not offset Wednesday’s disappointingly high report on U.S. consumer-level inflation, but “at least “It may ease investor nerves in the short term.” Morgan Stanley.
A separate report found fewer U.S. workers filed for unemployment benefits last week. This is the latest sign that the job market remains remarkably strong despite high interest rates.
A growing concern is that persistently high inflation could tie the Fed’s hands, which had signaled it could cut interest rates three times in 2024. The Fed has kept its key interest rate at the highest level since 2001 in hopes of lowering rates. It has enough impact on the economy and investment prices to curb high inflation. The concern is that if interest rates remain too high for too long, they could trigger a recession.
In fact, some investors are now warning that a rate cut by the Fed could be seen as more of a red flag than anything else. They could only arrive if the economy and job market are weak enough to require a further boost to the economy.
All of this is happening at a time when the U.S. stock market has soared more than 20% since Halloween, which critics have already called too high. Interest rates need to fall or corporate earnings need to strengthen for stock prices to look more reasonable without requiring a sharp decline.
Earnings season has just begun, when companies report their profits for the first three months of the year to investors. Analysts generally expect S&P 500 companies to report their third consecutive quarter of growth, according to FactSet.
The reasons for the underlying profit growth may be changing, Bank of America strategists say. Oson Kwon and Savita Subramanian write in a report for BofA Global Research that while they have traditionally counted on cost cuts and other moves to squeeze more profit out of every dollar of revenue, revenue He said the next stage of upcycling will be driven by increased sales.
CarMax slumped to one of the biggest losses in the S&P 500 after reporting its latest quarterly profit was lower than analysts expected. Business conditions have become even more difficult due to rising interest rates on auto loans, stricter lending standards, and declining consumer confidence. The company’s stock price fell 13.1%.
Fastenal fell 4.9%. The company that sells fasteners and other industrial and construction supplies reported first-quarter profit and revenue slightly below analysts’ expectations.
The winner on Wall Street was Rent the Runway, which more than doubled its revenue after reporting slightly better-than-expected earnings for its latest quarter. The company, which rents designer clothing to customers, also said it expects to break even on a cash flow basis next fiscal year. The company’s stock price soared 155%.
Constellation Brands rose 1% after reporting better-than-expected profits for the three months ended February. He cited the steady growth of the beer brand “Modelo Especial.” The company also projected earnings for the current fiscal year that beat Wall Street expectations.
Alpine Immun Sciences soared 36.8% after Vertex Pharmaceuticals agreed to buy the biotechnology company for $4.9 billion in cash.0.6% vertices added
In the bond market, the yield on the 10-year U.S. Treasury rose to 4.56% from 4.55% late Wednesday. The two-year bond yield, which more accurately reflects expectations for Fed action, fell to 4.93% from 4.97%.
In overseas stock markets, indexes fell slightly across Europe. Stock prices were mixed in Asia, with South Korea’s Kospi rising 0.1% following the ruling Conservative Party’s crushing defeat in parliamentary elections.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
