Wall Street a Bit Steadier Friday 09/22 10:04
Wall Street's ugly week is getting a bit of a reprieve, and stocks are
ticking higher on Friday, but it's still heading for its worst week in six
NEW YORK (AP) -- Wall Street's ugly week is getting a bit of a reprieve, and
stocks are ticking higher on Friday, but it's still heading for its worst week
in six months.
The S&P 500 was up 0.4% in morning trading, coming off a slide caused by the
stock market's growing understanding that interest rates likely won't come down
much anytime soon. The Dow Jones Industrial Average was up 62 points, or 0.2%,
at 34,132, as of 10:30 a.m. Eastern time, and the Nasdaq composite was 0.7%
Pressure has built on Wall Street as yields in the bond market climb to
their highest levels in more than a decade. They've been rising for months and
accelerated this week after the Federal Reserve indicated it's unlikely to cut
its main interest rate by as much in 2024 as investors had hoped. The federal
funds rate is at its highest level since 2001, which grinds down on investment
prices as it undercuts high inflation.
Yields were easing a bit Friday, which reduced the pressure on the stock
market. The yield on the 10-year Treasury slipped to 4.43% from 4.50% late
Thursday. It's still near its highest level since 2007.
The two-year Treasury yield, which moves more closely with expectations for
the Fed, dipped to 5.09% from 5.15%.
When bonds are paying more in interest, investors are less willing to pay
high prices for stocks. High rates hit particularly hard on stocks seen as the
most expensive or forcing investors to wait the longest for big growth in the
Recently, that's meant pain for technology stocks. Nvidia trimmed its loss
for the week to 5% after rising 1.6% Friday. The Nasdaq composite, which is
full of tech and other high-growth stocks, is on track a loss of 2.8% this week.
A couple tech-oriented companies got better news Friday after U.K.
regulators gave a preliminary approval to Microsoft's restructured $69 billion
deal to buy video game maker Activision Blizzard. It would be one of the
largest tech deals in history, and shares of Activision Blizzard rose 1.8%.
Microsoft rose 0.2%.
Shares of automakers were rising even after the United Autoworkers said
Friday it will expand its strike by walking out of 38 General Motors and
Stellantis plants in 20 states. The union did not broaden its limited strike
against Ford, which it said has met some of the union's demands in talks this
Ford rose 3.3%, and General Motors gained 0.7%.
Auto workers are looking for raises in pay and other benefits, and a
prolonged strike could put upward pressure on inflation if shortages send
prices higher. The strikes are just one of the long list of challenges looming
over the economy, including a possible U.S. government shutdown amid squabbling
on Capitol Hill, the upcoming resumption of student-loan repayments and shaky
economies around the world.
Hanging above them all is the realization sinking in on Wall Street that
interest rates may be staying higher for longer. The Fed indicated Wednesday it
may raise its main interest rate one more time this year. From there, the most
commonly predicted path by Fed officials would be half a percentage point of
cuts in 2024 from a level of 5.50% to 5.75%. Three months ago, Fed officials
were thinking a full percentage point of cuts may be the likeliest outcome.
High rates drag down inflation by intentionally slowing the economy and
denting prices for investments. They also take a notoriously long time to take
full effect and can cause damage in unexpected, far-ranging corners of the
economy. Earlier this year, high rates helped lead to three high-profile
collapses of U.S. banks.
Economists have already begun pushing out their forecasts for the first cut
to interest rates by the Fed next year. EY Chief Economist Gregory Daco, for
example, now expects 0.75 percentage points of cuts in 2024, down from his
earlier forecast for a full percentage point.
He says recent reports showing a cooldown in the job market suggest the
economy may experience a "controlled landing" from high inflation, instead of
the hard landing of a severe recession that some investors fear will result
from interest rates staying higher for longer.
A report on Friday suggested business activity across the economy is
stagnating. A preliminary measure of output compiled by S&P Global slipped to a
seven-month low as businesses in services industries lost momentum. Demand was
muted for both services and manufacturing providers.
In stock markets abroad, Chinese indexes rose following a report by
Bloomberg saying regulators are considering allowing foreigners to own more
shares. The report cited unnamed people "familiar with the matter."
Also on Friday, the U.S. Treasury Department and China's Ministry of Finance
launched a pair of economic working groups in an effort to ease tensions and
deepen ties between the nations.
Hong Kong's Hang Seng jumped 2.3%, while stocks in Shanghai rose 1.5%.
Indexes elsewhere in Asia were lower, while European stocks were mixed.