NEW YORK (AP) โ Wall Street fell Tuesday in a lackluster return to trading after a three-day holiday weekend.
The S&P 500 fell 17.85 points, or 0.4%, to 4,765.98. The Dow Jones Industrial Average fell 231.86, or 0.6%, to 37,361.12, and the Nasdaq composite sank 28.41, or 0.2%, to 14,944.35.
Spirit Airlines lost 47.1% after a US judge blocked its acquisition by JetBlue Airways over concerns that it would mean higher airfares for travelers. JetBlue rose 4.9%.
Meanwhile, bank stocks were mixed, as the earnings reporting season for the final three months of 2023 heats up. Morgan Stanley sank 4.2% after saying a legal matter and a special assessment subtracted $535 million from its pre-tax profits, while Goldman Sachs rose 0.7% after reporting results that beat Wall Street forecasts.
S&P 500 companies are likely to report little, if any, fourth-quarter earnings growth from a year ago if Wall Street analysts' forecasts are to be believed. Profits have been under pressure for more than a year due to rising costs amid high inflation.
But optimism is greater for 2024, where analysts forecast strong 11.8% growth in earnings per share for S&P 500 companies, according to FactSet. That, plus expectations of several interest rate cuts from the Federal Reserve this year, have helped the S&P 500 rack up 10 winning weeks in the last 11. The index remains within 0.6% of its peak history established two years ago.
Treasury yields have already plunged in the bond market on expectations of upcoming rate cuts, which traders believe could begin as early as March. It's a sharp turnaround from the past two years, when the Federal Reserve sharply raised rates in hopes of taming high inflation.
More flexible rates and yields ease pressure on the economy and financial system, while increasing investment prices. And for the past six months, interest rates have been the main force moving the stock market, according to Michael Wilson, a strategist at Morgan Stanley.
He believes that this dynamic will continue in the short term, with the โbond market still in charge.โ
For now, traders are projecting far more rate cuts through 2024 than the Federal Reserve itself has indicated. That raises the potential for big market swings around each Fed official's speech or economic report.
Yields rose in the bond market after Federal Reserve Governor Christopher Waller said in a speech that โthe policy is properly setโ on interest rates. After the speech, traders bet that the Fed's first rate cut would come in May instead of March.
Waller said the cooling data reports "have made me more confident than I have been since 2021 that inflation is on track" toward the Fed's 2% target and that the central bank should cut rates this year "provided inflation does not increase." bounce and stay elevated.โ
Until then, however, Waller said the economy is doing well, giving the Fed the ability to wait and monitor incoming data before taking its next step. "We can take our time to make sure we do this right," he said.
The 10-year Treasury yield rose to 4.06% from 3.95% late Friday to add pressure on the stock market. Higher yields can hit corporate profits, among other negatives for investors, although the 10-year yield is still well below the 5% level it hit in October.
On Wall Street, Boeing suffered one of the market's steepest losses as concerns about Problems for your 737 Max 9 airplane following the recent in-flight explosion of an Alaska Airlines plane. Boeing lost 7.9%.
On the winning side was Carrols Restaurant Group, the largest Burger King franchisee in the United States, which increased by 12.5%. Restaurant Brands International said it will buy all Carrols shares it does not already own for $9.55 per share in cash.
Overseas stock markets were mostly lower, including that of Japan, which had been on a winning streak that had taken it to its highest level since its bubble deflated in 1990.
The Nikkei 225 index fell 0.8% after the value of the Japanese yen strengthened against other currencies. A stronger yen can undermine profits for Japanese exporters, and rose on expectations that the Bank of Japan may be preparing to end its long-standing policy of keeping interest rates below zero.
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AP Business writers Matt Ott and Elaine Kurtenbach contributed.
