Saturday, April 20, 2024

Wall Street is drifting as yields in the bond market steady

by BIZ Magazine

NEW YORK (AP) — Wall Street is drifting on Thursday following a blowout profit report from Nvidia and some mixed reports on the U.S. economy.

The S&P 500 was 0.1% higher in morning trading and remains on track to break a three-week losing streak. The Dow Jones Industrial Average was up 61 points, or 0.2%, at 34,534, as of 10:13 a.m. Eastern time, and the Nasdaq composite was 0.1% lower.

Nvidia was in the spotlight after it reported much stronger profit and revenue for the latest quarter than expected. That raised hopes that this year’s frenzy on Wall Street around artificial-intelligence technology isn’t just hype.

Nvidia first stunned the market three months ago when it said the quick adoption of AI would send its revenue soaring in the three months through July. Its sales came in even better than forecast, at $12.51 billion, and the company gave a forecast for the current quarter that again blew past Wall Street’s expectations.

Nvidia climbed 3.1%, bringing its gain for the year so far to nearly 233%. It was the biggest single force pushing the S&P 500 higher.

Stocks of some other companies that have gotten an AI bump this year also rose. Microsoft gained 0.6%, and Meta Platforms rose 1%.

Conditions were a bit more muted across the rest of Wall Street, as yields in the bond market steadied themselves following a tumble the day before.

The yield on the 10-year Treasury remained at 4.20% after it fell there late Wednesday from 4.33% a day before. Earlier in the week, it touched its highest level since 2007. Higher yields mean bonds pay more in interest, which also causes investors to feel less need to pay high prices for stocks and other investments.

Yields found some stability following a couple mixed reports on the U.S. economy. One showed that fewer U.S. workers applied for unemployment benefits last week. It’s the latest sign that the job market remains remarkably resilient despite high interest rates.

Another report said orders for long-lasting manufactured goods slumped by more last month than economists expected. That could be a signal that conditions are worsening for the struggling manufacturing industry, but orders actually rose for the month after ignoring airplanes and other transportation equipment.

For now, weaker-than-expected reports on the economy may counterintuitively be more welcome in financial markets. The economy has managed to avoid a long-predicted recession, but the fear is that it’s so solid that it will keep upward pressure on inflation.

The Federal Reserve has already raised its main interest rate to the highest level since 2001 in hopes of grinding down high inflation. High rates work to do that by slowing the entire economy and hurting prices for investments.

Hope had built that the Fed’s latest rate hike in July may prove to be the last of this cycle, as inflation has cooled considerably since peaking above 9% last summer. Traders also have made bets for the Fed to begin cutting rates early next year.

But a series of stronger-than-expected reports on the economy have diminished those hopes. That’s why a speech coming on Friday by Fed Chair Jerome Powell is so highly anticipated. He’ll be speaking at an event in Jackson Hole, Wyoming, that has ben the site of major policy announcements in the past by the Fed.

The two-year Treasury yield, which moves closely with expectations for the Fed, was holding steady at 4.98%. A day before, it had dropped to that level from 5.05% after a report suggested U.S. business activity is cooling in August.

On Wall Street, Boeing fell 2.3% after supplier Spirit AeroSystems said it discovered a quality issue on certain models of the 737 fuselage. Spirit said it would continue to deliver the units to Boeing, which said there is no immediate safety concern associated with the issue.

In stock markets abroad, indexes were mixed in Europe after mostly rising in Asia.

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