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Wall Street falls as bond market cranks up the pressure


An umbrella held by a group leader is seen in front of the New York Stock Exchange on Wednesday, August 16, 2023 in New York City. (AP Photo/J. David Ake)

NEW YORK — Wall Street weakened on Wednesday to worsen what has already been a messy August.

The S&P 500 fell 33.53, or 0.8%, to 4,404.33, following its 1.2% drop the previous day. The Dow Jones Industrial Average fell 180.65 points, or 0.5%, to 34,765.74, and the Nasdaq composite fell 156.42, or 1.1%, to 13,474.63.

Increased pressure has come from the bond market, where yields have recently approached their highest levels since the Great Recession caused interest rates to collapse. Yields rose further after the release in the afternoon of the minutes of the last Federal Reserve meeting.

The minutes suggest Fed officials are unsure of their next move after catapulting the main interest rate they control to its highest level in more than two decades. Investors were hoping last month’s rate hike by the Fed would be the last.

High rates help reduce inflation by suddenly slowing down the whole economy and affecting the prices of investments. The Fed minutes showed that officials still don’t think the job on inflation is done, but they also recognize the risk of going too far and torpedoing the economy. They said they would make future decisions based on what data reports on inflation and the economy tell them.

Some analysts took the minutes as a suggestion another rate hike is possible, while others said it showed the Fed was likely done with its hike.

“Ultimately, there were no major surprises in the minutes, as the Fed is expected to remain dependent on data to determine the path of monetary policy through year-end,” Sam said. Millette, bond strategist for Commonwealth Financial Network.

Big tech stocks and other investments seen as particularly vulnerable to higher rates were among the day’s heaviest weightings on the indices. Tesla fell 3.2%. Facebook’s parent company, Meta Platforms, fell 2.5% and Amazon 1.9%.

Wall Street has generally retreated this month on several concerns, including fears that the torrid gains made this year through July have been overdone and that interest rates could stay high for longer.

A surprisingly strong U.S. retail sales report contributed to Tuesday’s tumble in stocks as it suggested there is still upward pressure on inflation. While strong economic reports are easing longstanding worries about a possible recession, they could also end up keeping rates higher for longer.

Data released on Wednesday showed U.S. industrial production improved more than economists had expected last month. Home builders have also innovated on more homes.

Treasury yields generally rose as reports paint the picture of a still strong economy. This puts pressure on stocks because when safe bonds pay more interest, investors feel less pressure to pay high prices for stocks and other risky investments.

The 10-year Treasury yield rose to 4.26% from 4.22% on Tuesday evening. It is again close to where it was when the Great Recession of 2007-2009 caused interest rates to crash. The 10-year yield helps set rates for mortgages and other large loans.

The 10-year Treasury inflation-protected note, which takes inflation into account, is at its highest level since 2009, according to Tradeweb.

On Wall Street, Intel’s stock fell 3.6% after it and Tower Semiconductor agreed to cancel Intel’s $5.4 billion buyout of the Israeli chipmaker. The deal has met with resistance from Chinese regulators.

Agilent Technologies fell 3.4% despite reporting higher-than-expected last-quarter earnings by analysts. Its forecast for future results, including revenue for the full year, fell short of expectations. He pointed to a tough economy, particularly in China.

Shares of Coinbase Global tumbled after announcing plans to soon offer cryptocurrency futures to eligible US customers after receiving federal regulatory approval. It rallied in the morning before ending down 0.2%.

Target and TJX, the company behind TJ Maxx and Marshalls, helped limit market losses. Target rose 3% and TJX climbed 4.1% after the two reported higher-than-expected spring earnings for the spring.

Progressive jumped 8.9% for the S&P 500’s biggest gain after reporting its July results, and other insurers have also stepped in to help dominate the market.

On foreign stock markets, indices were mixed in Europe. Stocks fell more sharply in Asia, where concerns are high about a faltering economic recovery in China.

Stock indices fell 1.4% in Hong Kong, 1.8% in Seoul, 1.5% in Tokyo and 0.8% in Shanghai.

At the start of this year, China’s economy was expected to grow sufficiently after the government removed anti-COVID restrictions to support a global economy weakened by high inflation. But China’s recovery has faltered so much that it unexpectedly cut a key interest rate on Tuesday and ignored a report on the number of its unemployed young workers.

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Merry C. Vega is a highly respected and accomplished news author. She began her career as a journalist, covering local news for a small-town newspaper. She quickly gained a reputation for her thorough reporting and ability to uncover the truth.

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