Stocks Slip as Treasury Yields Rise, Fed Signals High Rates to Stay
In a day of mixed results on Wall Street, most U.S. stocks slipped on Tuesday as Treasury yields rose, reflecting expectations that interest rates may remain high for an extended period.
The S&P 500 fell 0.2% to 5,051.41, while the Dow Jones Industrial Average rose 0.2% to 37,798.97. The Nasdaq composite also dipped 0.1% to 15,865.25.
Despite the overall decline, UnitedHealth and Morgan Stanley saw gains, with UnitedHealth climbing 5.2% after reporting strong first-quarter results, and Morgan Stanley rising 2.5% after surpassing expectations.
The rise in Treasury yields followed comments by Federal Reserve Chair Jerome Powell, who indicated that the central bank is waiting for more confidence in inflation heading sustainably down to its 2% target before cutting interest rates.
Powell’s remarks led to an immediate increase in Treasury yields, with the two-year yield reaching as high as 5%. However, yields later pared their gains, settling at 4.98%.
The prospect of high rates for a longer period impacted real estate investment trusts and utility stocks, which pay high dividends and attract income-seeking investors. Real estate stocks fell 1.5%, while utilities dropped 1.4%.
Additionally, homebuilder stocks declined after a report showed fewer sites were developed last month than expected. Lennar fell 2.3% and D.R. Horton sank 2%.
Northern Trust reported weaker earnings, leading to a 5% slump in its stock, while Johnson & Johnson saw a 2.1% decline despite beating profit forecasts.
In international markets, stock indexes in Asia and Europe also fell, reflecting the downturn on Wall Street. Hong Kong’s stock index dropped 2.1%, Seoul fell 2.3%, and London declined 1.8%.
Overall, the uncertainty surrounding interest rates and inflation continues to impact the stock market, with investors closely monitoring the Fed’s next moves.
