NEW YORK (AP) โ Stocks fell again Wednesday as Wall Street's slow start to 2024 enters its second day.
The S&P 500 was down 0.6% in morning trading, although it is still 2% away from its record set exactly two years ago. The Dow Jones Industrial Average was down 206 points, or 0.5%, as of 10:30 a.m. ET, and the Nasdaq composite was down 0.9%.
Some of last year's biggest winners were again giving up some of their winnings. Tesla fell 4.4% after soaring nearly 102% last year, for example. This and the six other โMagnificent 7โ Big Tech stocks, responsible for most of Wall Street's returns last year, have pulled back a bit after their tremendous runs.
The question hanging over the market is whether all the enthusiasm that helped stocks rise for nine straight weeks earlier this year was justified. It was based on expectations that inflation had cooled enough for the Federal Reserve to not only pause its interest rate increases but cut them several times this year. There are also high hopes that the economy can escape a recession, even after the Federal Reserve raised its main interest rate to the highest level since 2001.
A pair of reports released Wednesday morning indicated that the broader economy may indeed be slowing from its strong growth last summer, which the Federal Reserve hopes will keep inflation at bay. The danger is that it will slow down too much and begin to shrink.
A report showed that American employers Nearly 8.8 million job openings were announced at the end of November, slightly fewer than the previous month and the lowest figure since the beginning of 2021. The report also showed that slightly fewer workers quit their jobs during November.
The Federal Reserve is seeking exactly that cooldown, which it hopes will limit upward pressure on inflation without requiring widespread layoffs throughout the economy.
"This data will be good news for policymakers and will support the Federal Reserve's view that the next move in rates will be lower," likely in the spring, said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
A second report from the Institute for Supply Management showed that U.S. manufacturing is improving slightly more than economists expected, but is still contracting. Manufacturing has been one of the hardest hit areas of the economy recently, while the labor market and American household spending have remained resilient.
Treasury yields plunged immediately after the reports, but quickly recovered. The 10-year Treasury yield rose to 3.99% from 3.94% late Tuesday. This increases pressure on the stock market, although it is still well below the 5% it reached in October.
In the afternoon the main report of the day may arrive, when the Federal Reserve will publish the minutes of its latest monetary policy meeting. It was at that December meeting that officials hinted that their dramatic campaign to raise interest rates to control inflation might be over. They also released projections showing their average official expects the federal funds rate to fall 0.75 percentage points through 2024.
That sparked a big rally on Wall Street and bets that the Federal Reserve will cut rates further. Traders are betting with a relatively high probability of at least 1.50 percentage points on total cuts, according to CME Group data. The federal funds rate is currently within a range of 5.25% to 5.50%.
Even if the Federal Reserve is able to make its sweet landing to steer the economy away from high inflation, some critics still say the stock market has gone too far, too fast in recent months and is due for at least a pause. in his running.
In foreign stock markets, indices fell across much of Europe and Asia. Losses were especially pronounced in France, where the CAC 40 fell 1.9%, and in South Korea, where the Kospi sank 2.3%. Shanghai stocks were an outlier, rising 0.2%.
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