Wall Street is slipping Tuesday to pull further from its all-time high as it returns from a three-day holiday weekend. The S&P 500 was 0.6% lower in early trading, though it remains within 0.8% of its all-time high set two years ago. The Dow Jones Industrial Average was down 204 points, or 0.5%, and the Nasdaq composite was 0.6% lower.
Quick Read
- Wall Street Declines: Wall Street experiences a downturn, moving away from its all-time high as markets reopened after a three-day holiday weekend.
- Indices Performance: The S&P 500 dropped 0.6%, still near its all-time high from two years ago. The Dow Jones Industrial Average fell by 204 points (0.5%), and the Nasdaq composite also decreased by 0.6%.
- Corporate Earnings Impact: Morgan Stanley’s shares fell by 3% after legal issues and a special assessment reduced its pretax earnings. PNC Financial Services also declined by 3% due to weaker-than-expected results. Goldman Sachs experienced fluctuating stock prices after announcing better-than-expected quarterly results.
- Fourth Quarter Profit Growth: Wall Street analysts predict minimal profit growth, if any, for S&P 500 companies in the fourth quarter, affected by rising costs and high inflation.
- Optimism for 2024: Analysts forecast a strong 11.8% growth in earnings per share for S&P 500 companies in 2024. Expectations of several Federal Reserve interest rate cuts have contributed to recent stock market rallies.
- Treasury Yields and Rate Cuts: Treasury yields have decreased in anticipation of Fed rate cuts, potentially starting as early as March. This is a reversal from the past years of significant rate hikes aimed at controlling inflation.
- Market Dynamics: Lower interest rates and yields generally ease economic pressure and lift investment prices. Recently, the bond market has been a significant influence on stock market movements.
- Market Speculation and Fed Actions: Traders are anticipating more rate cuts through 2024 than the Fed has suggested, leading to potential market volatility.
- Treasury Yields Rise: The yield on the 10-year Treasury increased to 4.01%, putting additional pressure on the stock market.
- Individual Company Movements: Boeing faced notable losses due to concerns over its 737 Max 9 aircraft. Carrols Restaurant Group saw a significant jump after Restaurant Brands International announced plans to acquire all its shares.
- International Markets: Global stock markets, including Japan’s Nikkei 225, experienced declines. The strengthening of the Japanese yen against other currencies, amid speculations about the Bank of Japan’s interest rate policy, influenced the market downturn.
The Associated Press has the story:
Wall Street declines as big banks slide; Tesla, Apple weigh
Newslooks- NEW YORK (AP) —
Wall Street is slipping Tuesday to pull further from its all-time high as it returns from a three-day holiday weekend.
The S&P 500 was 0.6% lower in early trading, though it remains within 0.8% of its all-time high set two years ago. The Dow Jones Industrial Average was down 204 points, or 0.5%, and the Nasdaq composite was 0.6% lower.
Morgan Stanley sank 3% after it said a legal matter and a special assessment knocked $535 million off its pretax earnings for the final three months of 2023, while PNC Financial Services Group fell 3% after reporting weaker results analysts expected. Goldman Sachs was swinging between losses and gains after reporting quarterly results that topped Wall Street’s forecasts.
Companies across the S&P 500 are likely to report meager growth in profits for the fourth quarter from a year earlier, if any, if Wall Street analysts’ forecasts are to be believed. Earnings have been under pressure for more than a year because of rising costs amid high inflation.
But optimism is higher for 2024, where analysts are forecasting a strong 11.8% growth in earnings per share for S&P 500 companies, according to FactSet. That, plus big expectations for several cuts to interest rates by the Federal Reserve this year, have helped the S&P 500 rally to 10 winning weeks in the last 11.
Treasury yields have already sunk sharply in the bond market on expectations for upcoming cuts to rates, which traders believe could begin as early as March. It’s a sharp turnaround from the past couple years, when the Federal Reserve was hiking interest rates drastically in hopes of getting high inflation under control.
Easier rates and yields relax the pressure on the economy and financial system, while also boosting prices for investments. And for the past six months, interest rates have been the main force moving the stock market, according to Michael Wilson, strategist at Morgan Stanley.
He sees that dynamic continuing in the near term, with the “bond market still in charge.”
For now, traders are penciling in many more cuts to rates through 2024 than the Fed itself has indicated. That raises the potential for big market swings around each speech by a Fed official or economic report.
Yields rose Tuesday to add some more pressure on the stock market. The yield on the 10-year Treasury climbed to 4.01% from 3.95% late Friday. Higher yields can drag on corporate profits, among other negatives for investors, though the 10-year yield is still well below the 5% level it reached in October.
On Wall Street, Boeing fell to one of the market’s sharper losses as worries continue about troubles for its 737 Max 9 aircraft following the recent in-flight blowout of an Alaska Airlines jet. Boeing sank 4.7%.
On the winning side was Carrols Restaurant Group, the largest Burger King franchisee in the U.S., which jumped 12.6%. Restaurant Brands International said it will buy all the stock of Carrols that it doesn’t already own for $9.55 per share in cash.
Stock markets abroad were also mostly lower, including Japan’s, which had been on a winning streak that had carried it to its highest level since its bubble was deflating in 1990.
The Nikkei 225 slipped 0.8% after the value of the Japanese yen strengthened against other currencies. A stronger yen can sap profits from Japanese exporters, and it rose with expectations that the Bank of Japan could be preparing to end its longstanding policy to keep interest rates below zero.
