NEW YORK (AP) โ Wall Street is falling Tuesday following the latest sign that the U.S. economy may still be too strong for the Federal Reserve's liking.
The S&P 500 was down 0.5% in morning trading. The Dow Jones Industrial Average was down 64 points, or 0.2%, as of 10:10 a.m. ET, and the Nasdaq composite was down 0.9%.
Financial markets have been unstable in recent weeks due to concerns about the war in the Middle East and its possible impact on oil prices. But those concerns have eased somewhat to refocus attention on what typically drives long-term stock market moves: where interest rates and corporate profits are headed.
A report Tuesday morning raised concerns that the Federal Reserve may feel pressure to keep interest rates high. Such a measure could help reduce inflation, but at the same time it would also cause the prices of stocks and other investments to fall.
The report showed that shoppers spent more at U.S. retailers last month than economists expected. While that's a sign of a healthy economy and likely the result of a still-strong labor market, it could be giving inflation more fuel to stay above the Federal Reserve's 2% target.
The Federal Reserve is trying to achieve a delicate balancing act in which it slows the economy enough to reduce high inflation, but not so much as to cause a painful recession.
Treasury yields in the bond market rose immediately after the report was released. The 10-year Treasury yield rose to 4.84% from 4.69% late Monday.
A sharp jump since the summer in the 10-year yield has weighed on the stock market, as traders increasingly succumb to the Federal Reserve's forecasts that it is likely to keep rates high for a long time. The central bank has already raised its main interest rate to the highest level since 2001 and is debating whether to raise it once again.
High rates and yields hurt the prices of all types of stocks, and tend to particularly affect companies betting on growth expectations in the distant future or stocks considered expensive. This often puts Big Tech stocks in the spotlight, and a 5.4% drop for Nvidia and a 1.6% drop for Apple were two of the biggest weights on the S&P 500.
Nvidia and other chipmakers came under additional pressure after the U.S. government expanded restrictions to prevent China from acquiring advanced computer chips and the equipment to make them.
Meanwhile, several large US companies were seeing mixed results following their latest earnings reports.
Bank of America swung between modest gains and losses, rising 0.1% after beating Wall Street's third-quarter profit forecasts. It benefited from higher interest rates, but CEO Brian Moynihan also warned that Americans continue to reduce their spending after burning through the savings they had built up during the pandemic.
Johnson & Johnson fell 0.9% after also swinging between small gains and losses. According to FactSet, it reported earnings and revenue that missed analyst expectations.
Lockheed Martin rose 1.8% after reporting higher summer profits than analysts expected.
The general expectation for companies in the S&P 500 index is that profits returned to growth over the summer for the first time in a year.
A big winner in the market was Wyndham Hotels & Resorts, whose shares rose 11.2%. Rival Choice Hotels International said it wants to buy the company for $90 a share in cash and stock, valuing it at $7.8 billion.
The two had previously been talking about a possible deal, Choice CEO Patrick Pacious said, but Wyndham backed out after they were "in a negotiable range on price and consideration."
Choice shares fell 3.8%.
In foreign stock markets, indices were mixed in Europe after rising more strongly across Asia.
Crude oil prices were steadier after swinging sharply in recent weeks on concerns that the war in the Middle East could cause disruptions to supplies if it drew in Iran or other major oil-producing countries.
A barrel of benchmark U.S. crude rose 0.3% to $86.92, and Brent crude, the international standard, rose 0.3% to $89.91.
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AP Business writers Matt Ott and Elaine Kurtenbach contributed.
