Markets: Stocks slip amid rate worries, bank profits
new york –
Wall Street stocks tumbled Friday as concerns about interest rates overshadowed a promising start to the earnings season for US big companies.
The S&P 500 fell 8.58 points (0.2%) to 4,137.64 after giving up early gains. The Dow Jones Industrial Average fell 143.22, or 0.4%, to 33,886.47, while the Nasdaq Composite fell 42.81, or 0.4%, to 12,123.47.
The S&P 500 has hit four consecutive highs in the past five weeks. This is because the Federal Reserve (Fed) is expected to end its barrage of rate hikes soon as inflation falls. High interest rates can keep inflation in check, but they only slow the economy, increase the risk of recession, and lower the price of investments.
A senior Fed official tempered those expectations on Friday after saying further tightening may be needed as inflation remains too high. Federal Reserve board member Christopher Waller also said that even after the rate hike is over, it will have to stay high longer than the market expects.
After his comments, traders built bets that the Fed would raise rates at its next meeting in May, rather than halting rate hikes for the first time in over a year. Some have started betting that the Fed will raise rates again in June, according to CME Group data.
High-growth stocks tended to be hit hardest by high interest rates, and big tech stocks were the most heavily weighted in the S&P 500. Microsoft he fell 1.3%.
Parts of the economy have already started to slow under the weight of rising interest rates, raising fears of a possible recession. U.S. shoppers slashed their spending at retail stores more than expected last month, according to a report Friday. Much of that was due to lower gasoline prices, and the fall in what economists call “core retail sales” wasn’t as bad as expected.
“The challenge for the Federal Reserve was to contain inflation without completely freezing the economy in the process,” said Mike Lowengart, head of model portfolio construction at Morgan Stanley Global Investment Office. ‘ said. “The dynamics are still playing out in the market and we may see more volatile price action as a result.”
What could make things more difficult for the Fed is a separate report on Friday that said U.S. households are bracing for higher inflation. We expect inflation to be 4.6%, up from 3.6% the previous month.
This could be a touchy subject, as the Fed has long worried it could lead to a vicious cycle of high inflation. However, the survey shows that long-term inflation expectations are stable, with him posting 2.9% for the fifth straight month.
All worries pushed US Treasury yields higher. The 10-year Treasury yield rose to 3.51% from 3.45% late Thursday. Helps set interest rates for mortgages and other important loans.
Two-year US Treasury yields moved in line with expectations for the Fed, jumping from 3.97% to 4.10%.
Helping offset some of the interest rate concerns was a big win for some of the country’s biggest banks. They reported better-than-expected gains in his first three months of the year.
They helped kick off a reporting season for big US companies whose expectations are almost spooky. Despite those concerns, JPMorgan Chase rose 7.6% after earnings surged more than half year-over-year.
It benefited from tensions uncovered in the banking system that rocked global markets last month. These concerns have led some customers to withdraw cash from smaller banks and move it to larger banks.
Citigroup also rose 4.8% after reporting stronger-than-expected gains. BlackRock, the world’s largest asset manager, similarly beat expectations with earnings up 3.1%.
Boeing was one of the most important constituents of the S&P 500. Boeing shares fell 5.6% after the aircraft maker said on Thursday that production and delivery of a “significant number” of 737 Max aircraft could be delayed. body.
Boeing said supplier Spirit Aerosystems used a “non-standard manufacturing process” to install fittings near the rear of some 737s. Boeing said the situation was not an immediate safety issue and that planes already flying “can continue to operate safely”.
Contributed by AP Business Writers Joe McDonald and Matt Ott.