International

Currency traders work near the screen showing the Korea Composite Stock Price Index (KOSPI) at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Tuesday, April 16, 2024.

AP Photo/Ahn Young-joon

Stock market today: Wall Street drifts in mixed trading as Treasury yields rise more

By The Canadian Press

Published 10:44 PDT, Tue April 16, 2024

Last Updated: 11:51 PDT, Tue April 16, 2024

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NEW YORK (AP) — U.S. stocks are wavering Tuesday, as worries about interest rates staying high for a while compete with strong profit reports from some big companies.

The S&P 500 was down 0.1 per cent in afternoon trading, coming off a sharp loss where it bent under the pressure from a jump in Treasury yields. The Dow Jones Industrial Average was up 93 points, or 0.2 per cent, as of 2:15 p.m. Eastern time, and the Nasdaq composite was 0.1 per cent higher.

A 4.8 per cent climb for UnitedHealth helped support the market after the insurer reported stronger results for the first three months of the year than analysts expected. Morgan Stanley was another winner, rising 2.6 per cent, after likewise topping expectations.

The wilder action on Wall Street was in the bond market, where Treasury yields swung following comments by Federal Reserve Chair Jerome Powell. They've been climbing rapidly as traders give up on hopes that the Fed will deliver many cuts to interest rates this year. High rates hurt prices for all kinds of investments and raise the risk of a recession in the future.

Powell said at an event Tuesday that the central bank has been waiting to cut its main interest rate, which is at its highest level since 2001, because it first needs more confidence inflation is heading sustainably down to its 2 per cent target.

“The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he said, referring to a string of reports this year showing inflation remains hotter than forecast.

He suggested if higher inflation does persist, the Fed will hold rates steady “for as long as needed." But he also acknowledged the Fed could cut rates if the job market unexpectedly weakens.

Treasury yields climbed immediately after Powell's comments. They had already been higher after the Fed's vice chair made similar comments as Powell earlier in the day.

Philip Jefferson said his expectation is for inflation to keep easing and for the Fed to hold its main rate “steady at its current level.” That contrasted with what he said in February, when he said “it will likely be appropriate to begin dialing back policy restraint at some point this year” if things went as he expected.

The yield on the two-year Treasury, which closely tracks expectations for Fed action, shot as high as 5 per cent immediately after Powell spoke, back to where it was in November.

But yields later pared their gains as the afternoon progressed, and the two-year yield drifted back to 4.97 per cent. That's still up from 4.91 per cent late Monday.

Traders are mostly betting on the Fed delivering just one or two cuts this year after coming into 2024 expecting six cuts or more. They're now also betting on a 14% probability that zero cuts will arrive, up from just 1 per cent a month ago, according to data from CME Group.

With the threat rising for rates to stay high, stocks that tend to swing the most with interest rates led the market lower.

Utility stocks and real-estate investment trusts had some of the sharpest losses in the S&P 500. They pay relatively high dividends and tend to attract the same kind of investors as bonds do. When bonds are paying higher yields, income-seeking investors may camp there instead.

High rates also can translate into more expensive mortgages, and stocks of homebuilders slumped after a report showed homebuilders broke ground on fewer sites last month than economists expected. Lennar fell 2.4 per cent, and D.R. Horton sank 2 per cent.

Northern Trust slumped 4.7 per cent after the financial services company reported weaker earnings for the start of the year than analysts expected. Johnson & Johnson sank 2 per cent despite topping profit forecasts. Its revenue came in a whisper below expectations.

Companies are under even more pressure than usual to report fatter profits and revenue because the other lever that sets stock prices, interest rates, looks unlikely to add much lift soon.

The stock of Donald Trump's social-media company also slumped again. Trump Media & Technology Group fell another 14.1 per cent to follow up on its 18.3 per cent slide from Monday.

The company said it's rolling out a service to stream live TV on its Truth Social app, including news networks and “other content that has been cancelled, is at risk of cancellation, or is being suppressed on other platforms and services.”

The stock has dropped below $23 after nearing $80 last month as euphoria fades around the stock and the company made moves to clear the way for some investors to sell shares.

In stock markets abroad, indexes tumbled across Asia and Europe as they caught up with the drubbing Wall Street took on Monday. Stock indexes fell 2.1 per cent in Hong Kong, 2.3 per cent in Seoul and 1.8 per cent in London.

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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.

– Stan Choe, The Associated Press