Stocks end mixed; Treasury yields rise after solid data on the economy
Wall Street‘s weak start to 2024 carried into a third day, and stocks finished mixed on Thursday after reports showing the U.S. job market remains solid, though maybe a touch too strong.
The Standard & Poor’s 500 slipped 16.13 points, or 0.3%, to 4,688.68 and is on track for its first losing week in the last 10. The Dow Jones industrial average eked out a gain of 10.15 points, or less than 0.1%, to close at 37,440.34, and the Nasdaq composite fell 81.91 points, or 0.6%, to 14,510.30.
Walgreens Boots Alliance sank 5.1% after it nearly halved its dividend so it could hold on to more cash. That helped overshadow gains for airlines and cruise ship operators, which recovered some of their sharp losses from earlier in the week. Carnival steamed 3.1% higher, and United Airlines got a 2.4% lift.
U.S. stocks have broadly regressed this week after rallying powerfully into the end of last year. Critics said the market was due for at least a breather after the big run, which fed on hopes that inflation has cooled enough for the Federal Reserve to cut interest rates sharply this year.
Rate cuts give prices for stocks and other investments a boost, while also relaxing the pressure on the economy and financial system. Treasury yields in the bond market have already eased significantly since last autumn on hopes for such cuts, releasing pressure on the stock market.
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But Treasury yields rose Thursday after reports showing the job market may be stronger than expected. The economy is in a delicate phase where investors want it to remain solid but not too hot.
A healthy job market is good for workers and stamps out worries about an imminent recession. But too much strength could prod the Federal Reserve to hold the line longer on high interest rates because it could keep upward pressure on inflation. The Fed has already hiked its main interest rate to the highest level since 2001.
One report from the U.S. government Thursday showed fewer U.S. workers filed for unemployment benefits last week than expected. Another from ADP Research Institute said private employers accelerated their hiring last month by more than economists expected.
A more comprehensive report on the job market is arriving Friday. Economists expect that to show U.S. hiring slowed to 160,000 jobs last month from 199,000 in November.
“If tomorrow’s numbers show the same kind of strength and the economy keeps rolling along, it’s fair to wonder why the Fed would be in a rush to cut rates,” said Chris Larkin, managing director, trading and investing at E-Trade from Morgan Stanley.
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Traders are betting the Federal Reserve will cut interest rates by twice as much this year as it’s indicated. Wall Street is also thinking the first cut could come as soon as March, and a stronger-than-expected economy makes such aggressive predictions less realistic. Critics had already called them overly aggressive.
After Thursday’s data reports, the yield on the 10-year Treasury rose to 3.99% from 3.91% late Wednesday. The yield on the two-year Treasury, which more closely tracks expectations for the Fed, climbed to 4.39% from 4.33%.
Stocks have already rallied in part on expectations for sharp cuts coming to interest rates soon. If the Fed doesn’t cut as deeply and as quickly as expected, prices for stocks and other investments could be in jeopardy.
On Wall Street, Peloton Interactive jumped 13.9% after it announced a partnership to bring its workout content to TikTok.
APA fell 7.3% after it said it would buy Callon Petroleum in an all-stock deal valued at roughly $4.5 billion, including debt. Callon Petroleum gained 2.9%.
In stock markets abroad, indexes were modestly higher in much of Europe and a bit lower in much of Asia.
In Tokyo, the mood was somber as the market reopened from the new year holidays with a moment of silence after a major earthquake Monday left at least 77 people dead and dozens missing.
New car buyers may have better luck in 2024 than in recent years, experts say, because higher inventory levels will put downward pressure on prices.
Dark-suited officials bowed their heads in a ceremony that usually features women clad in colorful kimonos. Japan’s benchmark Nikkei 225 fell 0.5%.
AP writers Yuri Kageyama and Matt Ott contributed to this report.
