NEW YORK: The benchmark S&P 500 slipped and the main US indexes were set for monthly losses on Tuesday as Treasury yields rose with investors bracing for the possibility of interest rates remaining high for a prolonged period.
Wall Street indexes witnessed a volatile February after a strong performance at the start of the year as signs of strength in the US economy and elevated inflation spurred worries that the Fed will stick to its hawkish policy for longer.
The blue-chip Dow slid on Tuesday as Goldman Sachs fell 2.5% after Chief Executive David Solomon said the bank is considering “strategic alternatives” for its consumer business, while the tech-heavy Nasdaq stayed afloat.
“It just boils down to the expectations in markets that there is more work that the Federal Reserve will have to do as far as taking rates higher and keeping them there for a longer period of time is concerned,” said Keith Buchanan, portfolio manager at GLOBALT Investments.
“Three or four weeks ago there was an expectation of one or possibly even two federal cuts this year and that has been completely priced out of markets.” Traders have started to price in the chances of a bigger 50 basis-point rate hike in March, although the odds remain low at about 23%, according to Fed fund futures, which suggest rates peaking at 5.4% by September, up from 4.57% now.
BofA Global Research warned the Fed could even hike interest rates to nearly 6%.
The yield on two-year Treasury notes, which tracks investors’ expectations of the path of interest rates, slipped to 4.79% but traded just below a near four-month high hit in the previous session.
Chicago Fed President Austan Goolsbee, a voter in the rate-setting committee this year, will speak later in the day.
At 11:49 a.m. ET, the Dow Jones Industrial Average was down 156.71 points, or 0.48%, at 32,732.38, the S&P 500 was down 3.59 points, or 0.09%, at 3,978.65, and the Nasdaq Composite was up 4.86 points, or 0.04%, at 11,471.83.
Meta Platforms rose 3.2% after the Facebook parent said it was creating a new top-level product group focused on generative artificial intelligence.
Target Corp rose 2.3% after the big-box retailer reported a surprise rise in holiday-quarter sales but cautioned on 2023 earnings due to an uncertain US economy.
Zoom Video Communications Inc climbed 1.7% after it forecast annual profit above Wall Street estimates and said it will integrate more AI into its products.
Norwegian Cruise Line Holdings Ltd slid 11.5% after the cruise operator’s full-year profit forecast fell short of estimates, as it feels the squeeze from soaring fuel and labor costs.
Advancing issues outnumbered decliners by a 1.35-to-1 ratio on the NYSE and 1.34-to-1 ratio on the Nasdaq.
The S&P index recorded seven new 52-week highs and eight new lows, while the Nasdaq recorded 57 new highs and 71 new lows.
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