NEW YORK: The Nasdaq and the S&P 500 were muted on Tuesday as higher Treasury yields pressured equities, though the blue-chip Dow bucked the trend on robust results from health insurance heavyweight UnitedHealth.
Dow Component UnitedHealth Group advanced 5.6% after the health insurer beat expectations for first-quarter adjusted profit.
The gains were, however, kept in check as the yield on the 10-year government bond hit fresh five-month highs, a day after data showed US retail sales increased more than expected in March amid a surge in receipts at online retailers, further indicating a solid first quarter for the US economy.
“(Fed rate expectations) are getting reassessed since the CPI (consumer price index) print last week, and the probability of higher for longer is sinking in,” said Michael James, managing director of equity trading at Wedbush Securities.
“That’s having an effect on the weakness that’s been seen not just today, but for the last week since the CPI print.” Meanwhile, Israel’s war cabinet was set to meet for the third time in three days, an official said, to decide on a response to Iran’s first-ever direct attack.
Several policymakers including Federal Reserve Chair Jerome Powell are slated to speak later in the day, and investors will be watching for clues on where the central bank stands on policy easing.
Fed Vice Chair Philip Jefferson said “it will be appropriate to hold in place the current restrictive stance of policy for longer” if inflation fails to slow as expected.
Both the S&P 500 and the Nasdaq are nearly 4% off from record high levels reached last month, as traders sharply readjusted their expectations of how much the Fed would cut rates this year.
Money market participants see only 42 basis points of easing, according to LSEG data. This is down from about 150 bps seen at the start of the year.
Most rate-sensitive sectors were the worst hit, with real estate and utilities down over 1% each.
At 11:38 a.m. ET, the Dow Jones Industrial Average was up 87.80 points, or 0.23%, at 37,822.91, the S&P 500 was down 6.53 points, or 0.13%, at 5,055.29, and the Nasdaq Composite was down 8.89 points, or 0.06%, at 15,876.13.
Morgan Stanley added 3.7% after beating first quarter profit estimates, fueled by a resurgence in investment banking.
Bank of America fell 3.9% after the lender reported a drop in first-quarter profit as it set aside more money to cover souring loans.
Johnson & Johnson slipped 1.6% as the drugmaker’s first-quarter revenue missed analysts’ estimates after sales from its blockbuster psoriasis drug, Stelara, fell short of expectations. Tesla shed 2.2% after falling over 5% in the last session, when an internal memo seen by Reuters showed the EV marker was laying off more than 10% of its global workforce.
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