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U.S. Stocks Move Mostly Lower Amid Ongoing Interest Rate Worries

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April 17 2024 4:20PM

After showing a lack of direction early in the session, stocks have moved mostly lower over the course of the trading day on Wednesday. The major averages have all moved to the downside after ending the previous session narrowly mixed.

The major averages have climbed well off their worst levels in recent trading but are currently all in the red. The Nasdaq (NASDAQI:COMP) is down 116.76 points or 0.7 percent at 15,748.49, the S&P 500 (SPI:SP500) is down 19.49 points or 0.4 percent at 5,031.92 and the Dow (DOWI:DJI) is down 24.12 points or 0.1 percent at 37,774.85.

The weakness that has emerged on Wall Street may partly reflect ongoing concerns about the outlook for interest rates following yesterday’s remarks by Federal Reserve Chair Jerome Powell.

During a moderated discussion with Bank of Canada Governor Tiff Macklem, Powell suggested rates are likely to remain higher for longer amid a “lack of progress” toward reaching the central bank’s inflation goal.

“Recent data shows solid growth and continued strength in the labor market but also a lack of further progress so far this year on returning to our 2 percent inflation goal,” Powell said.

Fed officials, including Powell, have repeatedly stated they need “greater confidence” inflation is slowing before they consider cutting interest rates.

“The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” Powell said. “That said, we think policy is well positioned to handle the risks that we face.”

The Fed chief’s remarks come as recent data showing sticky inflation along with continued economic strength have led to reduced expectations of a rate cut in June.

According to CME Group’s FedWatch Tool, the chances of a 25 basis point rate cut in June have tumbled to 16.4 percent compared to 55.2 percent just a week ago.

Among individual stocks, shares of Travelers (NYSE:TRV) have come under pressure after the insurance giant reported weaker than expected first quarter results.

Transportation and logistics company J.B. Hunt (NASDAQ:JBHT) is also seeing significant weakness after reporting first quarter results that missed analyst estimates.

On the other hand, shares of United Airlines (NASDAQ:UAL) are moving sharply higher after the airline reported a much narrower than expected first quarter loss.

Sector News

Despite the weakness being shown by the broader markets, airline stocks continue to see substantial strength following United’s upbeat results, with the NYSE Arca Airline Index soaring by 3.5 percent after ending Tuesday’s session at a two-month closing low.

Considerable strength has also emerged among utilities stocks, as reflected by the 1.6 percent gain being posted by the Dow Jones Utility Average. The average is bouncing off its lowest closing level in well over a month.

Gold stocks also continue to turn in a strong performance despite in a decrease by the price of the precious metal, with the NYSE Arca Gold Bugs Index climbing by 1.5 percent.

Meanwhile, semiconductor stocks remain under pressure on news of disappointing first quarter sales by Dutch chip equipment maker ASML, dragging the Philadelphia Semiconductor Index down by 2.3 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan’s Nikkei 225 Index slumped by 1.3 percent, while China’s Shanghai Composite Index surged by 2.1 percent.

Meanwhile, European stocks gave back ground after an early rally but still closed mostly higher. While the French CAC 40 Index climbed by 0.6 percent, the U.K.’s FTSE 100 Index rose by 0.4 percent and the German DAX Index close just above the unchanged line.

In the bond market, treasuries have shown a strong move back to the upside after moving sharply lower over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 6.1 basis points at 4.598 percent.