NEW YORK (AP) – Wall Street was subdued Thursday on worries that the economy is too warm, prompting the Federal Reserve to keep interest rates steady for an extended period of time.
The S&P 500 fell 0.3% in afternoon trading, marking its third straight quarter of decline. Major tech stocks were particularly weak, with the Nasdaq Composite Index down 0.9%. The Dow Jones Industrial Average, which is less heavily weighted toward tech stocks, has held up better than the rest of the market, rising 81 points, or 0.2%, to $34,518 as of 1:57 p.m. ET. became.
Stocks were feeling the pressure on bond markets, where yields rose earlier in the week after reports that growth in the U.S. services industry last month was stronger than economists expected. Yields remained high after Thursday’s report was released. Fewer U.S. workers filing for unemployment Last week I benefited more than I expected.
While such reports are encouraging for the economy and indicate that the long-predicted recession is not on the horizon, there is also the possibility that the economy may remain strong enough to push up inflation.
The Fed has already raised interest rates It raised key interest rates to the highest level in more than 20 years in hopes of slowing the economy enough to bring inflation down to its 2% target. The economy is getting closer to that point, with inflation falling from a peak of more than 9% last summer. But the worry is that the last percentage point improvement may be the Fed’s toughest.
“While the economy has certainly slowed and inflation has cooled, employment continues to be a thorny issue for the Fed,” said Mike Loewengert, head of model portfolio construction. “This is the basis of our battles,” he said. At the Morgan Stanley Global Investment Office.
High interest rates depress the prices of all types of stocks. But they tend to hurt the stocks of technology companies the most, with other companies rallying on hopes of higher growth in the distant future. Many of these stocks tend to have the most influence on the S&P 500 because they are the largest.
Apple dominated on Wall Street as it is the most valuable stock, dropping 3.2% after falling 3.6% the previous day.
Nvidia fell 2.6%, bringing its loss so far this week to 5.5%. The company and other stocks in the artificial intelligence industry have soared this year on hopes that AI could lead to explosive future profit growth.
C3.ai fell 12.6% late Wednesday after the company said it does not expect to make a profit in the final quarter of this year as it ramps up investments in generative AI-related opportunities. Analysts also noted that the company’s profit margin levels in the first and most recent quarter of the fiscal year were disappointing.
While most stocks on Wall Street fell, a handful of stocks were helping limit losses.
Westlock, which makes cardboard and other packaging materials, rose 4% after Smurfit Kappa Group said it was in talks to combine the two companies, keeping its headquarters in Dublin, Ireland. .
In the bond market, the yield on the two-year note fell to 4.98% from 5.03% late Wednesday. It remains well above the 4.88% level seen earlier this week. Two-year Treasury yields tend to be tied to expectations for the Fed.
Traders still expect the Fed to keep interest rates unchanged at its next meeting later this month. But they’re betting on an almost coin-flip chance of further gains by the end of the year, according to CME Group data.
The yield on the 10-year U.S. Treasury note, which is at the heart of the bond market and helps set interest rates on mortgages and other important loans, fell to 4.27% from 4.30% late Wednesday.
In overseas stock markets, Chinese indexes fell after the latest suggestive data about the world’s second-largest economy. Hong Kong’s Hang Seng shares fell 1.3% and Shanghai shares fell 1.1% after reports that China’s exports had declined for the fourth consecutive month compared to the same month last year.
The economic recovery after anti-coronavirus restrictions were lifted was far below expectations. Although this removed a major driver of global economic growth, it also helped ease some inflationary pressures around the world.
In Europe, stock indexes were mixed with only small movements.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.