NEW YORK: Wall Street’s main indexes fell on Monday, pressured by rising Treasury yields after Federal Reserve Chair Jerome Powell pushed back firmly against market speculations of imminent rate cuts, while investors assessed earnings from corporate America.
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 signaled the labor market’s resilience in the face of tight credit conditions, uncertainty over when borrowing costs might be lowered prevailed.
US Treasury yields climbed, with those on 30-year notes jumping to 4.35%.
“The Fed is going to keep rates where they are for longer than the market expects, barring some significant change in the economic data that we’re getting,” said Nicholas Brown, partner at Granite Harbor Advisors.
Traders expect a 62.8% chance of an at least 25-basis-point rate cut in May down from 90% over a week ago, according to the CME FedWatch Tool.
Investors also took a breather after Wall Street’s recent bull-market run that saw the benchmark S&P 500 and the blue-chip Dow ending at record high levels on Friday, boosted by Meta Platforms and Amazon.com’s solid results.
Results were in from nearly half of the S&P 500 firms and fourth-quarter earnings estimates were improving sharply, with about 80% of the reports beating expectations, according to LSEG data on Friday.
Caterpillar rose 1.5% to hit a record after posting a higher quarterly profit, while Estee Lauder surged 13.5% as the MAC lipstick maker aims to cut about 3% to 5% of its workforce.
At 11:36 a.m. ET, the Dow Jones Industrial Average was down 356.48 points, or 0.92%, at 38,297.94, the S&P 500 was down 25.66 points, or 0.52%, at 4,932.95, and the Nasdaq Composite was down 91.37 points, or 0.58%, at 15,537.59.
The S&P 500 materials sector was the worst hit, down 2.4%, dragged down by a 13.8% decline in Air Products after the industrial gas manufacturer forecast 2024 profit below estimates.
Boeing dropped 1.5% after saying a new quality glitch in some 737 MAX planes would delay some deliveries.
Tesla dropped 5.2% to a near one-year low after Piper Sandler slashed the stock’s price target and on a report that German software company SAP will no longer source its company cars from the EV maker.
Nvidia advanced 3.6% to a record high following a price-target raise by Goldman Sachs.
Catalent soared 9.6% on Novo Nordisk parent Novo Holdings’ plans to buy the contract drugmaker in an $11.5-billion all-cash deal.
Declining issues outnumbered advancers for a 7.03-to-1 ratio on the NYSE and a 3.59-to-1 ratio on the Nasdaq.
The S&P index recorded 21 new 52-week highs and 10 new lows, while the Nasdaq recorded 34 new highs and 138 new lows.
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