Wall Street’s main indexes have fallen as Treasury yields rose after Fed chair Jerome Powell pushed back firmly against market speculations of imminent rate cuts while investors assessed earnings from US corporations.
In an interview aired on Sunday, Powell said more evidence on a sustainable downtrend in inflation was needed to warrant lower rates while Minneapolis Fed president Neel Kashkari wrote in an essay published on Monday that a resilient economy could defer rate cuts for some time.
Fresh data from the Institute for Supply Management showed the US services sector’s growth picked up in January, with a measure of input prices rising to an 11-month high.
While Friday’s data signalled the labour market’s resilience in the face of tight credit conditions, uncertainty over when borrowing costs might be lowered prevailed.
US Treasury yields were on the rise, with the two-year yield jumping to a one-month high of 4.48 per cent.
“Investors are concerned that while the economy is good and we’re not headed for recession, it is too strong and so the Fed might cut rates later and have fewer cuts in all,” said Sam Stovall, chief investment strategist at CFRA Research.
Traders expect a 67 per cent chance of an at least 25-basis-point rate cut in May and a near-94 per cent chance in June, according to the CME FedWatch Tool.
Investors also took a breather after Wall Street’s recent bull-market run that left the benchmark S&P 500 and the blue-chip Dow at record high levels on Friday, boosted by Meta Platforms and Amazon.com’s solid results.
Results are now in from nearly half of the S&P 500 firms and fourth-quarter earnings estimates are improving sharply, with about 80 per cent of the reports so far beating expectations, according to LSEG data on Friday.
Caterpillar jumped 1.2 per cent after a higher quarterly profit while Estee Lauder surged 14.6 per cent as the MAC lipstick maker aims to cut about 3.0 per cent to 5.0 per cent of its workforce.
In early tradind on Monday, the Dow Jones Industrial Average was down 255.47 points, or 0.66 per cent, at 38,398.95, the S&P 500 was down 20.21 points, or 0.41 per cent, at 4,938.40, and the Nasdaq Composite was down 69.85 points, or 0.45 per cent, at 15,559.10.
The S&P 500 materials sector was the worst hit, down 2.6 per cent, dragged down by a 15.3 per cent decline in Air Products after the industrial gas manufacturer forecast 2024 profit below estimates.
Boeing dropped 2.1 per cent after saying a new quality glitch in some 737 MAX planes would delay some deliveries.
Tesla lost 3.4 per cent after Piper Sandler slashed the stock’s price target and on a report German software company SAP will no longer source its company cars from the EV maker.
Nvidia jumped 4.0 per cent to a record high following a price-target raise by Goldman Sachs.
Catalent soared 10 per cent to an all-time high on Novo Nordisk parent Novo Holdings’ plans to buy the contract drug maker in an $US11.5-billion ($A17.8 billion) all-cash deal.
Declining issues outnumbered advancers for a 6.62-to-1 ratio on the NYSE and a 3.48-to-1 ratio on the Nasdaq.
The S&P index recorded 19 new 52-week highs and nine new lows while the Nasdaq recorded 30 new highs and 98 new lows.
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