NEW YORK (AP) — Most U.S. stocks slipped as Treasury yields climbed again on rising expectations that interest rates may stay high for a while. The S&P 500 fell 0.2% Tuesday. The Dow Jones Industrial Average rose 0.2%, and the Nasdaq composite fell 0.1%. UnitedHealth helped support the market after jumping on a stronger-than-expected profit report. But the majority of stocks weakened after two top officials at the Federal Reserve warned it may not cut interest rates for a while after inflation reports this year came in worse than expected. The two-year Treasury yield briefly climbed as high as 5% before paring its gain.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) — U.S. stocks are wavering Tuesday, as worries about interest rates staying high for a while compete with strong profit reports from some big companies.
The S&P 500 was down 0.1% in afternoon trading, coming off a sharp loss where it bent under the pressure from a jump in Treasury yields. The Dow Jones Industrial Average was up 93 points, or 0.2%, as of 2:15 p.m. Eastern time, and the Nasdaq composite was 0.1% higher.
A 4.8% climb for UnitedHealth helped support the market after the insurer reported stronger results for the first three months of the year than analysts expected. Morgan Stanley was another winner, rising 2.6%, after likewise topping expectations.
The wilder action on Wall Street was in the bond market, where Treasury yields swung following comments by Federal Reserve Chair Jerome Powell. They’ve been climbing rapidly as traders give up on hopes that the Fed will deliver many cuts to interest rates this year. High rates hurt prices for all kinds of investments and raise the risk of a recession in the future.
Powell said at an event Tuesday that the central bank has been waiting to cut its main interest rate, which is at its highest level since 2001, because it first needs more confidence inflation is heading sustainably down to its 2% target.
“The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he said, referring to a string of reports this year showing inflation remains hotter than forecast.
He suggested if higher inflation does persist, the Fed will hold rates steady “for as long as needed.” But he also acknowledged the Fed could cut rates if the job market unexpectedly weakens.
Treasury yields climbed immediately after Powell’s comments. They had already been higher after the Fed’s vice chair made similar comments as Powell earlier in the day.
Philip Jefferson said his expectation is for inflation to keep easing and for the Fed to hold its main rate “steady at its current level.” That contrasted with what he said in February, when he said “it will likely be appropriate to begin dialing back policy restraint at some point this year” if things went as he expected.
The yield on the two-year Treasury, which closely tracks expectations for Fed action, shot as high as 5% immediately after Powell spoke, back to where it was in November.
But yields later pared their gains as the afternoon progressed, and the two-year yield drifted back to 4.97%. That’s still up from 4.91% late Monday.
Traders are mostly betting on the Fed delivering just one or two cuts this year after coming into 2024 expecting six cuts or more. They’re now also betting on a 14% probability that zero cuts will arrive, up from just 1% a month ago, according to data from CME Group.
With the threat rising for rates to stay high, stocks that tend to swing the most with interest rates led the market lower.
Utility stocks and real-estate investment trusts had some of the sharpest losses in the S&P 500. They pay relatively high dividends and tend to attract the same kind of investors as bonds do. When bonds are paying higher yields, income-seeking investors may camp there instead.
High rates also can translate into more expensive mortgages, and stocks of homebuilders slumped after a report showed homebuilders broke ground on fewer sites last month than economists expected. Lennar fell 2.4%, and D.R. Horton sank 2%.
Northern Trust slumped 4.7% after the financial services company reported weaker earnings for the start of the year than analysts expected. Johnson & Johnson sank 2% despite topping profit forecasts. Its revenue came in a whisper below expectations.
Companies are under even more pressure than usual to report fatter profits and revenue because the other lever that sets stock prices, interest rates, looks unlikely to add much lift soon.
The stock of Donald Trump’s social-media company also slumped again. Trump Media & Technology Group fell another 14.1% to follow up on its 18.3% slide from Monday.
The company said it’s rolling out a service to stream live TV on its Truth Social app, including news networks and “other content that has been cancelled, is at risk of cancellation, or is being suppressed on other platforms and services.”
The stock has dropped below $23 after nearing $80 last month as euphoria fades around the stock and the company made moves to clear the way for some investors to sell shares.
In stock markets abroad, indexes tumbled across Asia and Europe as they caught up with the drubbing Wall Street took on Monday. Stock indexes fell 2.1% in Hong Kong, 2.3% in Seoul and 1.8% in London.
AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
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