New York (AP)— Wall Street slipped on Monday, adding to losses from late last week on worries about higher interest rates and inflation.The S&P 500 was down 0.6% in afternoon trade and was on track for a second straight decline after. A surprisingly strong report on the US jobs market undermined market hopes for easing interest rates.
The Dow Jones Industrial Average was up 82 points, or 0.2%, at 12:32 p.m. was down to 33,8245. Earlier in the day, the Nasdaq Composite was down 0.7%.
Some of the sharper moves were again in bond markets, where expectations are rising for the Federal Reserve. To hold interest rates high to combat inflation. It’s something the Fed has been talking about for a long time, but something the market has been stubborn about not fully believing.
Two-year Treasury yields, which tend to track expectations for the Fed, jumped It zoomed to 4.46% from 4.29% late Friday and just 4.10% the previous day. This is an important step for the bond market. The 10-year yield, which helps set rates for mortgages and other key debt, rose to 3.64% from 3.52% late Friday.
Higher rates slow the economy by design in hopes of suppressing purchasing power that could fuel inflation. But they also raise the risk of a serious downturn and market losses in the meantime.
Friday’s shaky jobs report showed that U.S. employers added a million more jobs than expected last month, despite a higher rate. Generally, such energy would be good news for markets. At the very least, it should mean higher sales for many companies.
But it also raised concerns that a too-strong labor market would keep inflationary pressures at bay,. And force the Fed to keep rates higher for longer. That directly contradicts market expectations that cooling inflation could prompt the Fed. To halt its rate hikes soon and then cut later this year.
Such hopes drove a big rally on Wall Street to start the year, and the S&P 500 remains up more than 7% for 2023 so far. Stocks have taken the brunt of the past year due to the rapid rate hikes enacted by the Fed to combat inflation. These include technology stocks and others seen as riskiest or most expensive.
Investors came into the year highly skeptical about such stocks, and once they got a spark higher. The momentum for them quickly snowballed. Analysts said the rebound was more about improving sentiment than the economy or other fundamental changes.
Fed Chair Jerome Powell may offer some more clues about where rates are headed on Tuesday. When he speaks at the Economic Club of Washington, D.C.
In addition to Powell, markets are also waiting this week to hear from about 100 companies. In the S&P 500 how much they will earn in the final three months of 2022.
According to FactSet, about half of S&P 500 companies have reported, and they’re on track to fall about 5% from year-ago levels. It would be the first such drop since the summer of 2020, when the pandemic was ravaging the global economy.
Tyson Foods fell 5% after reporting weaker-than-expected profit and revenue in the latest quarter.
Dell Technologies fell 3.5% after it said it would cut about 5% of its workforce. The company’s vice chairman said in a message to employees that “market conditions continue. To deteriorate with an uncertain future.”
The winning side was Idex Laboratories, a company in the pet healthcare industry. It rose rates 1.6% after reporting stronger-than-expected profit and revenue.
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AP Business writers Joe McDonald and Matt Ott contributed.
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