Thursday, May 30, 2024

Stock market today: An ugly April for Wall Street is closing with more weakness

by Associated Press

NEW YORK (AP) — U.S. stocks are slipping Tuesday after the latest hotter-than-forecast reading on the economy raised more worries about inflation and interest rates staying high.

The S&P 500 was 0.3% lower in early trading and on track to close out its first losing month in the last six. The Dow Jones Industrial Average was down 185 points, or 0.5%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 0.3% lower.

Stocks have struggled this month as traders have largely given up on hopes that the Federal Reserve will deliver multiple cuts to interest rates this year. A string of reports showing inflation remains stubbornly high has sent Treasury yields climbing in the bond market, which in turn has put downward pressure on stocks.

Treasury yields rose again Tuesday after a report showed U.S. workers won bigger gains in wages and benefits than expected during the first three months of the year. While that’s good news for workers and the latest signal that the job market remains remarkably solid despite the negative effects of high interest rates, it feeds into worries that upward pressure remains on the economy and inflation.

The yield on the 10-year Treasury rose to 4.67% from 4.61% just before the report’s release. The two-year Treasury yield, which more closely tracks expectations for the Fed, rose back above the 5% level to 5.01% from 4.97% late Monday.

No one expects the Federal Reserve to change its main interest rate on Wednesday following its latest policy meeting, but traders are now mostly betting the Fed will cut rates either one or zero times this year, according to data from CME Group. That’s a big letdown after traders came into the year forecasting six or more cuts.

The Fed itself was earlier penciling in three cuts to rates during 2024, but top officials have recently hinted rates may stay high for longer as they wait for more confirmation inflation is heading down toward their 2% target. The Fed’s main interest rate is sitting at the highest level since 2001.

Without the benefit of easing interest rates, companies will need to deliver bigger profits in order to support their stock prices, which critics have called too expensive following their run to records.

McDonald’s fell 2% after its profit for the latest quarter came up just shy of analysts’ expectations. It was hurt by weakening sales trends at its franchised stores overseas, in part by boycotts from Muslim-majority markets over the company’s perceived support of Israel.

GE Healthcare Technologies tumbled 9.2% after it reported weaker results and revenue for the latest quarter than analysts expected. F5 dropped 8.6% despite reporting a better profit than expected. Its revenue fell short of forecasts, and it said customers were remaining cautious and forecasting largely flat IT budgets for the year.

On the winning side was 3M, which rose 3.2% after reporting stronger results and revenue than forecast. Eli Lilly climbed 6.4% after turning in a stronger profit than expected on strong sales of its Mounjaro and Zepbound drugs for diabetes and obesity. It also raised its forecasts for revenue and profit for the full year.

This earnings reporting season, which is close to its halfway point, has largely been better than expected. Not only have the tech companies that dominate Wall Street done well, so have smaller companies across a range of industries.

That’s a change from the recent past, and it helped push strategists at Deutsche Bank to raise their forecast for full-year earnings growth. Many companies are topping forecasts because they’ve been able to wring more profit out of each $1 of revenue than analysts were expecting, according to Binky Chadha, chief strategist at Deutsche Bank.

In stock markets abroad, Japan’s Nikkei 225 rose 1.2% after reopening following a holiday. The government reported stronger-than-expected gains in industrial production for March.

Indexes were mixed across much of the rest of Asia and Europe.

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