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Financial Markets 09/23 15:57
NEW YORK (AP) -- Pressure from
https://apnews.com/article/interest-rates-inflation-trump-federal-reserve-52d5e8
2d851a624b95bc142a0c90d924 hit a new level on Wall Street Wednesday after a
surprisingly strong report on the economy raised worries about inflation, while
oil prices halted their slide. The squeeze caused U.S. stocks to sink.
The S&P 500 fell 0.8% after finishing the prior day just 0.4% below
https://apnews.com/article/stock-markets-ai-semiconductors-fed-energy-3a23f22469
cd0e0062f711096906525c set last month. The Dow Jones Industrial Average dropped
352 points, or 0.7%, while the Nasdaq composite sank 1.1% from
https://apnews.com/article/markets-ai-oil-wall-street-de8c5f9659e44556e40e661f79
4b48ad.
Stocks wilted after the yield on the 10-year Treasury jumped to 5.10% from
4.96% late Tuesday, which is a considerable move for the bond market. High
yields undercut prices for stocks and other investments, while also slowing the
economy by making it more expensive for everyone to borrow money.
Wednesday's jump briefly sent the 10-year yield near 5.14%, back to where it
was in 2007 before the global financial crisis caused yields to crater. Yields
have been climbing since bottoming out in the COVID pandemic, and they've
accelerated recently because of worries about high inflation, the U.S.
government's heavy debt and other concerns.
Worries about inflation got a jolt Wednesday morning after a preliminary
report suggested growth in U.S. business activity surged to its strongest level
in more than five years. That's an encouraging signal, to be sure, but it
indicates the economy may have plenty of fuel for more inflation.
The report also suggested costs for businesses are leaping at the fastest
rate in four years, in part because of more expensive oil, according to Chris
Williamson, chief business economist at S&P Global Market Intelligence. That
could mean businesses will pass those higher costs onto their customers in
coming months.
Oil prices are high because of worries that https://apnews.com/hub/iran will
keep oil bottled up in the Middle East for a long time.
The price for a barrel of Brent oil to be delivered in November rose 3.9% to
$103.08 on Wednesday. That reversed a decline for Brent, which had been falling
since it neared $110 last week.
https://apnews.com/article/trump-united-nations-unga-iran-ai-f7cb0b3ebc492446c0b
e97ed3a6843aa with mediators between U.S. and Iranian officials, but nothing
concrete has come from it yet.
Brent oil to be delivered in December, where most of the trading in the
market has moved, rose 2.8% to $98.12 per barrel.
Even with its recent decline, the price for a barrel of Brent remains much
higher than the roughly $72 it cost before the war with Iran began.
Inflation has remained so stubbornly high that the Federal Reserve raised
its short-term interest rate last week for the first time in three years in
hopes of slowing down increases in the cost of living.
Fed Gov. Michael Barr said in a speech on Wednesday that further hikes "are
likely to be needed" to get inflation to the Fed's 2% target. Traders now see
better than a 50% probability that the Fed will hike its federal funds rate at
each of its next two meetings, in October and December, according to data from
CME Group.
So far, strong growth in profits for U.S. companies has helped support the
U.S. stock market despite higher interest rates and more expensive oil.
KB Home became the latest to deliver a stronger profit for the latest
quarter than analysts expected. But its stock nevertheless swung between losses
and gains after the homebuilder's executive chairman said conditions got even
tougher for the industry over the last three months. It finished with a loss of
3%.
Potential customers are becoming more cautious because of
https://apnews.com/article/mortgage-rates-housing-interest-financing-home-d57cc5
a38163cfef3a7b2639dd3d8d7c caused by the rise in the 10-year Treasury yield.
They also are feeling pressure from "geopolitical uncertainty and broader
economic headwinds," Jeffrey Mezger said.
General Mills likewise reported a stronger profit for the latest quarter
than analysts expected. But the company behind the Cheerios and Progresso
brands said it also expects growth this fiscal year to fall below its
historical track record "driven by a continued challenging consumer backdrop,"
and it did not raise its forecast for profit over the full fiscal year.
Its stock flipped between gains and losses before rising 1%.
All told, the S&P 500 fell 58.61 points to 7,706.03. The Dow dropped 352.10
to 51,511.59, and the Nasdaq composite sank 308.24 to 26,936.04.
In stock markets abroad, indexes slipped across much of Europe and Asia.
Stock indexes fell 1% in Hong Kong and 0.4% in Shanghai ahead of Chinese
President Xi Jinping's state visit to Washington,
https://apnews.com/article/trump-xi-arrival-washington-state-visit-baea8dbdb8c83
2ae1b295579709dc967.
The leaders are
https://apnews.com/article/trump-xi-china-relationship-ai-tariffs-iran-2716ee31a
fa579e9ca18ae76cbe35ab9 in their third meeting since Trump returned to the
White House. That is despite the world's two largest economies
https://apnews.com/article/china-us-ai-models-safety-concerns-adb45169d436d5f940
fc7b4ebeaeef3b developments and trade, while pushing for leverage in persistent
https://apnews.com/article/trump-xi-iran-oil-china-78b8ccd21cbc4bc0ab19a79f68372
ec0 and Taiwan.
___
AP Business Writers Chan Ho-him and Michelle Chapman contributed to this
report.
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