Wall Street Slips as Treasury Yields Rise Further

Wall Street

On Tuesday, most U.S. stocks weakened amid ongoing concerns about high interest rates, despite some notable profit reports from major companies.

The S&P 500 dipped by 0.3% in morning trading, following a significant drop prompted by surging Treasury yields. Meanwhile, the Dow Jones Industrial Average rose by 77 points, or 0.2%, by 10:45 a.m. Eastern time, and the Nasdaq composite declined by 0.2%.

The market received some support from UnitedHealth, which climbed 5.3% after reporting stronger-than-expected results for the first quarter. Similarly, Morgan Stanley saw a 3.8% increase after surpassing expectations.

However, the majority of stocks on Wall Street experienced declines. Northern Trust slumped by 3.1% after reporting weaker earnings than anticipated, while Johnson & Johnson fell by 1.2% despite beating profit forecasts.

With interest rates remaining high, companies face added pressure to deliver robust profits and revenue. Traders are adjusting their forecasts for when the Federal Reserve might begin reducing its main interest rate, which currently stands at its highest level in over two decades. Concerns are growing that the Fed may need to maintain high rates for longer than expected to combat persistent inflation.

Following a speech by Federal Reserve Vice Chair Philip Jefferson, Treasury yields rose again, extending Monday’s increase. Jefferson stated his expectation for inflation to continue easing and for the Fed to maintain its current interest rate level, a shift from his remarks in February.

Federal Reserve Chair Jerome Powell’s upcoming speech could further influence market sentiment, potentially leading to fluctuations as traders revise their rate-cut forecasts. While expectations for multiple rate cuts at the beginning of the year have diminished, traders now anticipate only one or two reductions.

The 10-year Treasury yield climbed to 4.66% from 4.61% on Monday, while the two-year Treasury yield, which closely reflects expectations for Fed actions, rose to 4.95% from 4.91%.

On Wall Street, interest rate-sensitive stocks, such as real estate investment trusts and utility stocks, experienced the most significant losses. Meanwhile, Donald Trump’s social-media company saw its stock decline further, dropping by 10.4% after an 18.3% slide on Monday.

Global markets also faced declines, with indexes in Asia and Europe falling as they followed Wall Street’s downward trend. Hong Kong’s stock index fell by 2.1%, Seoul’s by 2.3%, and London’s by 1.9%.

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About the author: Stephanie Bedard-Chateauneuf has over six years of experience writing financial content for various websites. Over the years, Stephanie has covered various industries, with a primary focus on tech stocks, consumer stocks, health stocks, and personal finance. This stock lover likes to invest for the long-term. Stephanie has an MBA in finance.