total-news-1024x279-1__1_-removebg-preview.png

LANGUAGE

Dow slides as interest-rate worries keep investors on edge

Stocks tumbled on Wednesday on concerns about a further rise in Treasury yields and the timing and size of a possible interest rate cut by the Federal Reserve.

The Dow Jones Industrial Average fell 411.32 points, or 1.1%, to 38,441.54, its lowest level in about a month.

The S&P 500 and Nasdaq lost 0.6%.Benchmark 10-year Treasury yields hit a four-week high of 4.6%, extending Tuesday’s gains, after weak bond auctions.


The Dow Jones Industrial Average fell more than 350 points on Wednesday, hitting its lowest level in more than a month. Getty Images

“Bond yields continue to rise, which is weighing on the stock market as we continue to see a choppy and uneven recovery,” said James Abate, manager of Center American Select Equity Fund.

Conflicting expectations about the size and timing of interest rate hikes have kept markets on edge since the start of the year.

Traders had expected a rate cut by March earlier this year, but persistently high inflation and hawkish rhetoric from the central bank have downgraded expectations that a rate cut of just 25 basis points will come by November or December, according to the CME FedWatch tool.

“It’s going to be an uphill battle to get inflation up to the 2 percent target,” said Dylan Kremer, chief investment officer at Surtuity.

“But we expect the trend to continue toward that target over the next six to 12 months, potentially giving the Fed room to cut rates a few times later this year.”


New York Stock Exchange trader
Traders had expected a rate cut by March earlier this year, but persistently high inflation and hawkish rhetoric from the central bank have downgraded expectations that the cut will be just 25 basis points by November or December. Getty Images

Wall Street’s fear gauge, the CBOE Volatility Index, hit its highest level since May 3.

But the main focus this week will be Friday’s release of April personal consumption expenditures data, the Fed’s preferred inflation gauge.

Marathon Oil rose 8.4% after ConocoPhillips said it would buy the company in a stock deal for a market capitalization of just over $15 billion. ConocoPhillips fell 3.1%.

Airline stocks fell, led by a 14% drop in American Airlines after the company cut its second-quarter profit forecast.

Dick’s Sporting Goods Co. Inc.’s shares rose 16 percent after it raised its full-year sales and profit forecasts, while Abercrombie & Fitch Co. Inc.’s shares also rose 16 percent after it raised its full-year sales growth forecast.

Strong corporate earnings across the board helped offset interest rate concerns. Of the 480 S&P 500 companies that had reported earnings as of Friday, about 78% beat analyst expectations, according to LSEG data.

Facebook
Twitter
LinkedIn
Reddit
Telegram
WhatsApp