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Dow Leads Stocks Fall as Rising Treasury Yields Shake Nerves
US stocks were in the red on Wednesday after a rise in Treasury yields worried investors already weighing whether recent data would change the direction of interest rates.
The benchmark S&P 500 index (^GSPC) fell 0.7%, while the Dow Jones Industrial Average (^DJI) fell about 0.9%, dropping almost 350 points. The Nasdaq composite (^IXIC) also fell by more than 0.7%.
Stocks are falling as investors contemplate a jump in U.S. bond yields following the failure of a government debt auction, reflecting concerns that the Federal Reserve will keep rates higher for longer.
The 5-year Treasury yield rose to near four-week highs on Tuesday, while the 10-year yield (^ TNX) surpassed the key level of 4.5%. On Wednesday, the benchmark yield rose further, trading around 4.57%.
Those concerns appeared to be overshadowing hopes for AI growth that lifted the Nasdaq to a record in Nvidia’s maelstrom (NVDA) post-earnings recovery.
Investors are trying to decipher what will happen on Tuesday impression of consumer confidence stronger than expected means for the Fed’s policymaking, but they are prepared for a long wait for a pivot to rate cuts after a litany of warnings from his employees.
See more information: How does the job market affect inflation?
The release of the Fed’s Beige Book on Wednesday could shed more light ahead of Friday’s reading on PCE, the central bank’s preferred inflation gauge.
Live updates3
- Wednesday, May 29, 2024 at 4pm GMT+2
American Airlines cuts earnings outlook, shares fall
American Airlines (AAL) shares fell more than 15% on Wednesday morning as the airline cut its earnings in line with guidance for the current quarter.
The airline now forecasts earnings per share in the range of $1 to $1.15 for the current quarter, down from previous guidance of $1.15 to $1.45. It also now sees total revenue per available seat decline by a range of 5% to 6% compared to the previous year. American Airlines previously expected the metric to fall in the 1% to 3% range.
The company also announced that commercial chef Vasu Raja will leave the company in June.
Bank of America analyst Andrew Didora argued that “the cut appears to be a combination of increased domestic competition as well as a loss of corporate participation.”
And, according to Didora, American Airlines’ weak forecast comes at a time when the outlook for demand in the airline industry appears robust. Like Axios reported this morning, five of the busiest travel days in TSA data tracking since 2001 have occurred in the past two weeks. That includes a record 2.95 million travelers on the Friday leading up to Memorial Day weekend.
Stocks Fall as Yields Rise
Stocks fell at the open after a rise in Treasury yields unsettled investors, who were already weighing whether recent data would change the direction of interest rates.
The benchmark S&P 500 index (^GSPC) fell 0.7%, while the Dow Jones Industrial Average (^DJI) fell about 0.9%, dropping almost 350 points. The Nasdaq composite (^IXIC) also fell by more than 0.7%.
On Tuesday, the yield on five-year Treasury bonds rose to near four-week highs, while the 10-year yield (TNX) surpassed the key level of 4.5%. On Wednesday, the benchmark yield rose further, trading around 4.57%.
The economic outlook improves…
And who doesn’t want some sunny, positive macro data on a tough day? Not this guy, always looking for upbeat things.
I come armed with a dose of exactly that.
More than eight in ten chief economists expect the global economy to strengthen or remain stable this year, according to a new survey released today by the World Economic Forum (WEF). This is almost double the proportion presented in the January report.
The percentage of those predicting a recession in global economic conditions decreased to 17%, from 56% in January.
Inflation may have even more room to cool, according to new research from the World Economic Forum. (World Economic Forum)
