US Stocks Mostly Slip Monday 10/02 16:05
Stocks mostly slipped in mixed trading Monday as the constrictor of higher
interest rates tightened its coils around Wall Street.
NEW YORK (AP) -- Stocks mostly slipped in mixed trading Monday as the
constrictor of higher interest rates tightened its coils around Wall Street.
The S&P 500 edged up by 0.34, or less than 0.1%, to 4,288.39, coming off its
worst month of the year. The Dow Jones Industrial Average dropped 74.15 points,
or 0.2%, to 33,433.35, and the Nasdaq composite rose 88.45, or 0.7%, to
Slumps for oil-and-gas stocks weighed on the market after crude prices gave
back some of the sharp gains made since the summer. The majority of stocks fell
alongside them, with more than three quarters of those within the S&P 500
sinking, but gains for Apple and other influential Big Tech stocks helped
Stocks have broadly given back 40% of their strong gains for the year since
the end of July. The main reason is Wall Street's growing acceptance that high
interest rates are here to stay a while as the Federal Reserve tries to knock
high inflation lower. That in turn has pushed Treasury yields to their highest
levels in more than a decade.
The yield on the 10-year Treasury climbed again Monday, up to 4.67% from
4.58% late Friday, and is near its highest level since 2007. High yields send
investors toward bonds that are paying much more than in the past, which pulls
dollars away from stocks and undercuts their prices.
Stocks that pay high dividends with relatively steady businesses see
particular pain because their investors are more likely to switch between
stocks and bonds. That puts a harsh spotlight on utility companies. PG&E
dropped 5.6%, and Dominion Energy sank 5.3% for some of the sharpest losses in
the S&P 500.
High interest rates also make borrowing more expensive for all kinds of
companies, which can pressure their profits. Since the Federal Reserve
indicated last month it likely won't cut rates as much in 2024 as earlier
expected, the value of the U.S. dollar has also climbed against other
currencies. That can mean a painful hit for S&P 500 companies, which get a big
chunk of their revenue from abroad.
"If higher-for-longer rates keep the dollar at recent levels, corporate
profits will face a genuine headwind," according to Lisa Shalett, chief
investment officer at Morgan Stanley Wealth Management.
Besides hurting financial markets in the aim of lowering inflation, high
interest rates slow the overall economy and can cause disruptions in far-flung,
unexpected corners of the economy.
The overall U.S. economy has so far been holding up, defying predictions
that it would have fallen into a recession by now.
Manufacturing has been one area that's felt the sting of higher rates, and
reports on Monday suggested it's still contracting, though perhaps not by as
much as expected. A report from the Institute for Supply Management said U.S.
manufacturing shrank in September for an 11th straight month.
More encouraging for Wall Street was that the report also indicated prices
were easing in September. That could mean less pressure on inflation, which has
been feeling heat recently from fast-rising oil prices.
Crude oil prices pulled back on Monday after charging higher from $70 in the
summer. A barrel of U.S. crude fell $1.97 to settle at $88.82. Brent crude, the
international standard, also sank. Brent lost $1.49 to settle at $90.71 a
The drop for oil dragged stocks lower across the energy sector. Exxon Mobil
fell 1.7%, and Chevron lost 1.2%.
SmileDirectClub plunged 61.2% to 16 cents after the company that helps
people straighten their teeth filed for Chapter 11 bankruptcy protection.
On the winning side of Wall Street, Discover Financial Services rose 4.8%
for the biggest gain in the S&P 500. The company gave details about a consent
order it received from the Federal Deposit Insurance Corp, requiring Discover
Bank to improve its consumer compliance management system. Analysts pointed to
how Discover did not receive a fine, which could be seen as a positive for the
Congress over the weekend avoided a shutdown of the federal government,
which threatened to hurt the economy and disrupt the publication of economic
data Wall Street finds crucial. But Capitol Hill only temporarily delayed the
threat, promising another showdown. Plus, traders are well aware the stock
market has held up rather well through past shutdowns.
In stock markets abroad, indexes slumped across much of Europe.
In Asia, Japan's Nikkei 225 slipped 0.3% despite a survey from the central
bank showing business confidence is on the rise.