Saturday, April 13, 2024

Wall Street keeps drifting as oil recovers some of its sharp losses

by BIZ Magazine

NEW YORK (AP) — Wall Street remains largely stuck in neutral on Thursday following its big recent swings.

The S&P 500 was edging 0.1% lower in midday trading after flipping from an early, small gain. It’s been listless this week, coming off a sharp reversal after months of losses gave way to its best week of the year last week.

Even though its recent moves have been modest, if the S&P 500 can eke out a gain for the day, it would mark a ninth straight for its longest winning streak in 19 years.

The Dow Jones Industrial Average was down 55 points, or 0.2%, as of 11 a.m. Eastern time, and the Nasdaq composite was flat.

The Walt Disney Co. was strong after becoming the latest big U.S. company to report better profit for the last quarter than analysts expected. It rose 7.4% after saying it added more Disney+ streaming subscribers than Wall Street had forecast, while also increasing its target for annual cost savings.

Tapestry climbed 4.3% for another one of the bigger gains in the S&P 500 after the maker of high-end shoes and handbags beat Wall Street’s profit forecast

On the opposite end was Becton Dickinson, which sank 8.2%. The maker of medical equipment reported profit for the summer that matched Wall Street’s expectations, but its financial forecasts for its upcoming fiscal year fell short of some analysts’ estimates.

Topgolf Callaway Brands was another weight on the market and sank 17.9% despite beating analysts’ expectations for profit during the summer. It cut its forecasts for full-year revenue and profit, in part because of weakening trends at its Topgolf entertainment venues outside of newly opened ones.

The majority of companies has been topping Wall Street’s expectations for summertime profits, and businesses in the S&P 500 appear to be on pace to deliver their first overall growth in earnings per share in a year, according to FactSet.

Earnings reports have largely been running in the background, though, as the focus in financial markets has remained fixed on what bond yields are doing.

The yield on the 10-year Treasury rose to 4.53% from 4.50% late Wednesday after a report suggested the U.S. job market remains remarkably solid.

Fewer workers applied for unemployment benefits last week than economists expected. That’s good news for workers generally, indicating few layoffs, and for the economy. But it could also be adding upward pressure on inflation, which the Federal Reserve has been trying to corral through high interest rates.

High rates and yields hurt prices for stocks and other investments, while slowing the economy and raising the pressure on the financial system.

A swift rise in the 10-year Treasury yield that began in the summer earlier knocked the S&P 500 down by more than 10% from its peak for the year. The 10-year Treasury yield briefly topped 5% to reach its highest level since 2007, as it caught up with the Federal Reserve’s main interest rate, which is above 5.25% and at its highest level since 2001.

Last week, though, investors took comments from Fed Chair Jerome Powell to indicate that the central bank’s hikes to interest rates may be done. He said the summer’s jump in Treasury yields could substitute for further hikes to rates if they remain persistent. That triggered a sharp easing in Treasury yields, which in turn helped stocks to rally.

This week has seen financial markets largely digesting all the sharp movements.

Traders have been moving up their forecasts for when the Federal Reserve could begin cutting rates, with many expecting it to begin by summer, according to data from CME Group. But some economists are trimming their forecasts for how deeply the Fed may ultimately cut, saying the central bank will likely keep rates higher than they were before COVID.

At Goldman Sachs, for example, economist David Mericle says the Fed could begin cutting rates during the last three months of 2024. But he sees the Fed cutting its federal funds rate only to a range of 3.50% to 3.75% from its current range of 5.25% to 5.50%.

Earlier, Mericle thought the Fed could bring it down as low as 3% to 3.25%, but he said the U.S. government’s big, persistent deficits and other factors will likely keep rates higher.

In the oil market, crude prices regained some of their big losses from earlier in the week. A barrel of U.S. crude added 1.8% to $76.70, and Brent crude, the international standard, gained 2.3% to $81.40. Both, though, remain down more than 4% for the week so far amid worries about supplies outstripping demand.

In stock markets abroad, indexes were mostly higher across Europe and Asia.

Japan’s Nikkei 225 rose 1.5% after Prime Minister Fumio Kishida told local reporters he had decided against calling an election before the end of the year.

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