April 13, 2024
Stock Market

Wall Street slips after surprisingly strong manufacturing data sends yields up

NEW YORK (AP) — U.S. stocks are slipping from their record heights Monday after a surprisingly strong report on U.S. manufacturing cast doubts on how soon cuts to interest rates could arrive.

The S&P 500 was 0.3% lower in midday trading, coming off an all-time high and its latest winning month in a romp higher that began in late October. The Dow Jones Industrial Average was down 245 points, or 0.6%, as of 11:30 a.m. Eastern time, and the Nasdaq composite was 0.1% lower.

FedEx sank 2.1% after it said it did not extend its contract with the U.S. Postal Service to deliver air cargo domestically, which will end Sept. 29. AT&T fell 1.4% after saying over the weekend that sensitive information for millions of its current and former customers was recently found on the “dark web.”

Helping to offset some of the losses was a 2.3% climb for Baxter International, which said U.S. regulators approved its Novum IQ large-volume infusion pump used in health care. Miner Newmont added 1.9% as the price of gold continues to set records.

In the bond market, Treasury yields spurted higher after a report said U.S. manufacturing unexpectedly returned to growth last month. It snapped a 16-month run of contraction, according to the Institute for Supply Management.

A strong economy is good for the stock market because it can drive growth in profits for companies. But it can also keep upward pressure on inflation. That in turn could mean a delay for when the Federal Reserve may deliver the cuts to interest rates that investors crave.

Following the manufacturing data, traders on Wall Street trimmed their bets on the first cut to rates coming as soon as June. They now see just a 53.5% chance of that, down from roughly 70% a week earlier, according to data from CME Group.

The Fed has hiked its main rate to the highest level since 2001 in order to slow the economy and hurt investment prices enough to get inflation under control. Expectations for coming cuts have been a major reason the S&P 500 soared more than 20% from October through March. So too were a cavalcade of reports showing the U.S. economy remains remarkably solid despite high interest rates.

This week will offer more updates on the job market and key areas of the economy, including data on job openings across the country and the strength of U.S. services businesses. The headliner arrives on Friday, when economists expect a report to show that hiring cooled a bit last month.

A bit of a slowdown would be welcome on Wall Street, where the hope is that the economy remains solid but not so strong that it pushes inflation higher. Inflation is lower than it was at its peak nearly two years ago. But progress has become bumpier recently, with reports this year coming in hotter than expected.

Fed Chair Jerome Powell said again on Friday that the central bank is waiting to get “more good inflation readings” before cutting interest rates this year. It’s been sticking with an outlook for three cuts to rates in 2024. Wall Street traders have come around to that as well, after earlier forecasting even more cuts this year.

On Friday, a report said inflation is behaving as expected, at least by the measure that the Federal Reserve prefers to use. Both the U.S. bond and stock markets were closed that day.

In the bond market, the yield on the 10-year Treasury jumped to 4.32% from 4.21% late Thursday. The two-year yield, which more closely tracks expectations for the Fed, climbed to 4.71% from 4.63%.

In stock markets abroad, Tokyo’s Nikkei 225 fell 1.4% after a Bank of Japan quarterly survey on business conditions showed sentiment among large manufacturers declined for the first time in a year.

In China, stocks gained 1.2% in Shanghai after surveys suggested the country’s manufacturing industry is strengthening.

In Europe, stock markets were closed for a holiday.


AP Business Writers Matt Ott and Elaine Kurtenbach contributed.

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