NEW YORK (AP) — In the latest example of how positive economic news can have a negative impact on Wall Street, most U.S. stocks declined on Thursday following strong economic reports that raised concerns about high interest rates. The market reaction overshadowed another impressive earnings report from Nvidia, a major player in the market.
The S&P 500 was down 0.8% in afternoon trading, distancing itself from the recent record highs. The Dow Jones Industrial Average was down by 623 points, or 1.5%, by 2:30 p.m. Eastern time, while the Nasdaq composite was 0.4% lower.
Stocks were feeling the pressure from higher bond yields as the strong economic reports led traders to reconsider expectations regarding potential interest rate cuts by the Federal Reserve.
One report indicated that U.S. business activity is growing at a rapid pace, the fastest in over two years. S&P Global’s report showed growth not only in the services sector but also in the struggling manufacturing sector.
Another report highlighted the strength of the U.S. job market despite the high interest rates. Fewer workers filed for unemployment benefits last week than expected, suggesting that layoffs are currently low.
Treasury yields were relatively flat after the job report but rose following the business activity report, which also indicated persistent high selling prices.
With inflation pressure rising from both manufacturing and service sectors, achieving the Fed’s 2% target remains challenging, according to Chris Williamson, chief business economist at S&P Global Market Intelligence.
The Fed is aiming to balance the economy by keeping interest rates high to control inflation without causing a recession. Wall Street is eagerly awaiting possible rate cuts by the Fed.
If the economy continues to perform better than expected, the Fed may delay rate cuts, potentially leading to rate hikes and a recession to tackle inflation in the future.
Hopes for at least one rate cut remain, but Thursday’s reports caused some traders to reconsider their bets.
The yield on the 10-year Treasury rose to 4.47% from 4.43%, impacting stocks of utilities and real-estate companies that rely on high dividends to attract investors.
American Water Works dropped 3.6%, and Boston Properties fell 3.5%.
Within the S&P 500, Live Nation Entertainment experienced the largest decline, falling 8.2% after an antitrust lawsuit accused it and Ticketmaster of monopoly practices.
VF Corp., the company behind several popular brands, reported weaker revenue than expected and saw a 3.5% drop in its stock.
Despite the overall market decline, Nvidia stood out with a 9.3% increase after reporting strong profits. The company’s chips are in high demand for artificial intelligence systems.
In global markets, stocks in Europe and Asia showed mixed results. Japan’s Nikkei 225 rose 1.3% due to strong performance in semiconductor-related companies following Nvidia’s earnings report. On the other hand, indexes in Hong Kong and Shanghai fell amid concerns about the property sector crisis in China.
AP Business Writers Yuri Kageyama, Matt Ott, and Alex Veiga contributed.
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