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US Stocks Mostly Steady Tuesday 03/28 16:13
Stocks were mixed Tuesday as Wall Street regains some stability at the tail
end of what's been a turmoil-filled month.
NEW YORK (AP) -- Stocks were mixed Tuesday as Wall Street regains some
stability at the tail end of what's been a turmoil-filled month.
The S&P 500 dipped 6.26 points, or 0.2%, to 3,971.27, though the majority of
stocks within the index rose. The Dow Jones Industrial Average slipped 37.83,
or 0.1,%, to 3,394.25, and the Nasdaq composite fell 52.76, or 0.4%, to
11,716.08.
There was relative calm even in the bond market, which has been home to some
of Wall Street's wildest moves since fears flared about the banking system
earlier this month. Yields were rising only modestly following their
historic-sized moves in prior weeks.
This month has been dominated by worries that banks around the world may be
cracking under the pressure of much higher interest rates. But some calm has
returned to the market recently after regulators made big moves to protect the
system.
That has much of Wall Street's attention back on interest rates and what
central banks will do next with them. The Federal Reserve and other central
banks have a tough decision: Inflation is still high, which would typically
call for even higher interest rates. But the weakness for banks has shown some
fragility in the system that higher rates could worsen.
"I think the global central banks have put us in that middling zone, where
we're waiting for clarity on: Are they done?" said Rob Haworth, senior
investment strategist at U.S. Bank Wealth Management.
After the Fed hiked its key overnight rate all the way to a range of 4.75%
to 5%, up from virtually zero early last year, the market could find some
relief if the Fed does take a pause after hiking one more time as it's hinted,
Haworth said.
"That's a dramatic change" in rates over just a year, he said. "Just getting
to some form of stability provides some clarity for planning to begin."
Traders built bets Tuesday to say the Fed will raise rates at its next
meeting in May, though the slight majority is still calling for it to hold
rates steady.
Higher rates try to slow inflation by hitting the entire economy with a
blunt hammer. They also drag on prices for stocks along the way, particularly
technology and other high-growth stocks.
Apple, Microsoft and other Big Tech stocks were among the heaviest weights
on the S&P 500 Tuesday after dipping modestly.
On the winning side was McCormick & Co., which jumped 9.6% after the spices
and seasonings company reported stronger profit and revenue for its latest
quarter than analysts expected.
Other stocks were mixed, including financial stocks that have had a
turbulent month. Most of those in the S&P 500 rose, but some banks that
investors have highlighted as most at risk fell after erasing gains from the
morning.
First Republic fell 2.3%, while PacWest Bancorp. was down 5%.
The harshest focus has been on smaller and midsized banks in the hunt for
who could be next to suffer an exodus of customer akin to the run that toppled
Silicon Valley Bank.
One of the broader worries has been that all the furor for banks could lead
to a pullback in lending to businesses across the country. That in turn could
lead to less economic growth and a higher risk of a recession.
Jan Hatzius, chief economist and head of global investment research at
Goldman Sachs, recently raised his probability of a recession over the next
year to 35% from 25%. But in a report, he called the banking industry's
struggles "a headwind, not a hurricane" for the economy.
Reports on the economy have been coming in mixed. The job market remains
remarkably solid, while smaller corners of the economy have been showing more
weakness.
On Tuesday, one report showed that confidence among consumers is
strengthening, contrary to economists' expectations for a moderation. Another
report suggested U.S. home prices softened in January from December, but not by
quite as much as economists expected.
Traders are still largely betting the Fed will have to cut rates as soon as
this summer to prop up the economy. Such bets have returned in force since the
banking industry's woes began. They also materialized almost as quickly as a
prior round of bets for rate cuts had earlier disappeared following data
suggesting stickier-than-expected inflation.
Such drastic shifts in expectations for the Fed have led to huge swings in
the bond market. On Tuesday, yields were rising by only a bit.
The yield on the 10-year Treasury, which helps set rates for mortgages and
other important loans, rose to 3.55% from 3.54% late Monday.
The two-year yield, which moves more on expectations for the Fed, rose to
4.05% from 4.01% late Monday. It was above 5% earlier this month and at its
highest level since 2007.
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