Wall Street was more stable in mixed trading on Wednesday after reports suggested the U.S. economy could be slowing.
The Standard & Poor’s 500 rose 0.1% in morning trading, overcoming a 1.4% decline that had taken it to its lowest level in four months. The Dow Jones industrial average fell 52 points, or 0.2%, a day after erasing its year-to-date gains. The Nasdaq Composite was 0.4% higher at 10:15 a.m. Eastern time.
Stocks have been struggling since the summer under the weight of rising Treasury yields in the bond market, which have reached their highest level in more than a decade. High yields undermine stock prices by diverting investment money from stocks to bonds. They also reduce corporate profits by making borrowing more expensive.
The yield on the 10-year Treasury note, the centerpiece of the bond market, fell to 4.76% from its highest level since 2007 from 4.80% late Tuesday. Short- and longer-term returns also fell slightly to give the stock market more oxygen.
Yields fell and then pared losses following some mixed economic reports. The first reported hiring from non-government employers last month was weaker than expected.
There is currently hope on Wall Street that the labor market will cool as this could lead to less upward pressure on inflation. That, in turn, could convince the Federal Reserve to ease interest rates.
Having already raised its key interest rate to its highest level since 2001, the Fed has indicated it may keep rates higher next year than it previously expected. Treasury yields have risen accordingly as traders accept a new normal for markets with high interest rates for an extended period.
The Fed is paying particular attention to the labor market because too much strength could drive up worker wages sharply, which it fears could keep inflation well above its 2% target.
Wednesday’s ADP report suggested private employers added 89,000 jobs last month, a much steeper decline in hiring than the 140,000 economists had expected.
The report doesn’t have a perfect track record when it comes to predicting what the U.S. government’s broader jobs report says. That’s coming on Friday.
But “if Friday’s report also shows that the labor market is cooling, equity investors may be a little less worried about indefinitely higher interest rates,” said Mike Loewengart, head of model portfolio construction at the Morgan Stanley Global Investment Office.
A second economic report said business growth in the U.S. service sector slowed slightly more in September than economists had expected.
It also offered some evidence of continued pressure on inflation, as prices paid by services firms rose last month at a similar pace to August.
Oil prices fell on Wednesday to add some fuel to inflation. The benchmark U.S. crude oil price fell 2.9% to $86.64 a barrel. The price has been declining since breaking above $93 last week. Brent crude, the international standard, fell 2.8% to $88.40.
Crude oil prices generally rose from $70 in the summer after some oil producing countries announced production cuts.
Wall Street is also coping with the ouster of Kevin McCarthy as House Speaker. The unprecedented move to remove a speaker from office is unlikely to change much in the short term, with U.S. government funding locked in until Nov. 17.
“Still, a leadership vacuum in the House of Representatives increases the likelihood of a government shutdown when the current funding extension expires,” Goldman Sachs economists said.
A shutdown would weigh on the U.S. economy and increase the risk of a recession, although financial markets have held up relatively well during previous shutdowns.
On Wall Street, shares of major technology companies supported the market after leading it lower a day earlier. They tend to align more closely with interest rate expectations, as high-growth stocks are seen as the biggest victims of high returns.
Microsoft rose 0.8% and was the single biggest force pushing the S&P 500 higher due to its enormous size. Amazon rose 1.3% and Tesla gained 2.1%.
On the losing side of Wall Street were the major oil and gas companies, which fell along with the price of crude oil. Exxon Mobil fell 2.7%, Chevron fell 2.8% and ConocoPhillips fell 2.9%.
Cal-Maine slumped 7.4% after the egg producer reported a sharp year-over-year profit decline in its latest quarter. The company said egg prices have returned from their record highs “to more normalized levels” as the industry recovers from the recent outbreak of highly pathogenic bird flu.
On the markets abroad, stock indices fell slightly in large parts of Europe.
Asian stocks fell more sharply after overcoming Wall Street’s sharp losses the previous day. Tokyo’s Nikkei 225 index fell 2.3%, South Korea’s Kospi fell 2.4% and Hong Kong’s Hang Seng slipped 0.8%.
` writers Matt Ott and Elaine Kurtenbach contributed to this report.
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