Wall Street is adding to its records as U.S. stock indexes tick higher on Friday. The S&P 500 was 0.6% higher in afternoon trading after setting an all-time high the day before. The Dow Jones Industrial Average was up 78 points, or 0.2%, and the Nasdaq composite was 0.8% higher a day after surpassing its prior record set in 2021.
Quick Read
- Wall Street’s stock indexes, including the S&P 500, Dow Jones, and Nasdaq, saw gains, with the S&P 500 hitting a new record high.
- Treasury yields fell following weaker-than-expected manufacturing and consumer sentiment reports, fueling speculation that the Federal Reserve might cut interest rates in June.
- Dell Technologies’ shares surged 28.1% after reporting better-than-expected quarterly earnings, driven by demand for AI-optimized servers.
- NetApp’s shares jumped 23% on strong earnings and positive momentum in AI, with profit forecasts exceeding expectations.
- New York Community Bancorp’s stock plummeted 22.6% after revealing internal weaknesses in loan reviews, leading to a $2.4 billion charge and the immediate resignation of its CEO.
- Concerns persist about smaller regional banks and the impact of high-interest rates on the financial system, with hopes pinned on potential Federal Reserve rate cuts.
- Reports indicated continued contraction in U.S. manufacturing but a slower pace of price increases for raw materials, while consumer sentiment dipped slightly but remained relatively stable.
- Treasury yields declined, with the 10-year Treasury yield dropping to 4.20% and the two-year yield to 4.54%, reflecting adjusted expectations for the Fed’s interest rate policies.
- Deutsche Bank economists predict a 1 percentage point cut in the Fed’s main interest rate this year, potentially starting in June, but urge caution due to potential inflationary pressures from market rallies and lower yields.
- Global stock markets saw gains, with Japan’s Nikkei 225 rising 1.9% despite mixed economic indicators, including a drop in unemployment and a contraction in manufacturing activity.
The Associated Press has the story:
Wall Street stocks add to its records as bond yields ease
Newslooks- NEW YORK (AP) —
Wall Street is adding to its records as U.S. stock indexes tick higher on Friday. The S&P 500 was 0.6% higher in afternoon trading after setting an all-time high the day before. The Dow Jones Industrial Average was up 78 points, or 0.2%, and the Nasdaq composite was 0.8% higher a day after surpassing its prior record set in 2021.
In the bond market, Treasury yields eased after reports on manufacturing and sentiment among U.S. consumers came in weaker than economists expected. The data reinforced bets that the Federal Reserve may begin cutting interest rates in June, particularly after a report on Thursday showed a key measure of inflation the Fed closely tracks behaved pretty much as expected last month.
Dell Technologies was helping to support the stock market after jumping 28.1%. It reported stronger profit and revenue for the latest quarter than analysts expected, highlighting demand for its AI-optimized servers.
A seemingly never-ending crescendo of demand for artificial-intelligence technology has helped catapult stocks higher over the last year. Even Dell’s roughly 140% jump in the last 12 months pales compared with the more than 240% surge for Nvidia.
NetApp leaped 23% after reporting stronger results than expected, saying it’s seeing “good momentum in AI.” The data company also gave a forecasted range for profit in the current quarter that topped what several analysts were expecting.
The mood was much more dour in the banking industry, where New York Community Bancorp tumbled 22.6%. It warned investors late Thursday that it found weakness in how it internally reviews loans, caused by ineffective oversight, risk assessment and monitoring activities.
The company said it won’t be able to file its annual report in time, and it took a charge worth $2.4 billion against its results for the last three months of 2023. Its CEO stepped down after 27 years with the company, effective immediately.
Much attention has been on smaller regional banks after last year’s crisis in the industry led to the collapses of several. One of them, Signature Bank, was swallowed up by NYCB, which has caused the resulting bank to face stricter oversight amid struggles for loans tied to real estate.
While NYCB faces many issues that are specific to it, the worry has been that banks across the industry face challenges from loans made for real-estate projects.
Interest rates are high after the Federal Reserve hiked its main rate to the highest level since 2001, which adds pressure on the financial system. The hope has been that the Fed will cut interest rates several times this year to relieve some of that pressure.
The Fed has indicated it may do so if inflation continues to cool decisively toward its 2% target. But a string of stronger reports on the economy than expected have forced traders on Wall Street to push back their forecasts for when the cuts could begin. The hope now is that the Fed could start in June after traders shelved their earlier expectations for March.
Hopes for a June cut held after a report showed the U.S. manufacturing industry shrank in February for a 16th straight month. Manufacturing has been one of the weakest-performing areas of the economy, while a resilient job market and spending by U.S. consumers have propped it up. The report from the Institute for Supply Management also said prices paid by manufacturers for raw materials rose again, but at a slower pace than in January.
A separate report from the University of Michigan said sentiment among U.S. consumers was weaker than economists expected. It slipped in February from January but held most of the gains seen in recent months. That’s important because spending by U.S. consumers makes up the bulk of the economy.
In the bond market, Treasury yields sank following the data reports. The yield on the 10-year Treasury fell to 4.20% from 4.25% late Thursday and from 4.28% just before the data’s release.
The two-year Treasury yield, which more closely tracks expectations for the Fed, sank to 4.54% from 4.62% and is roughly back to where it was two weeks ago. That’s before a couple reports said inflation last month was hotter than expected at both the consumer and wholesale levels.
Economists at Deutsche Bank expect the Fed to cut its main interest rate by 1 percentage point this year, down from its current level of 5.25% to 5.50%. Like many traders, it also expects the Fed to start in June.
But chief U.S. economist Matthew Luzzetti also says there are several reasons to be cautious about cuts. Chief among them is the fact that stock prices have already rallied and Treasury yields have already sunk on expectations for coming cuts, which loosens conditions for the economy and could add upward pressure on inflation.
In stock markets abroad, Japan’s Nikkei 225 jumped 1.9%. Its unemployment rate dropped to 2.4% in January, though a measure of manufacturing activity showed a contraction.
Indexes were up more modestly across the rest of Asia and Europe.
