NEW YORK (`) — Wall Street slipped Tuesday, moving further away from its all-time high as it returns from a three-day holiday weekend.
The S&P 500 was down 0.6% in early trading but remains within 0.8% of its all-time high set two years ago. The Dow Jones Industrial Average fell 204 points, or 0.5%, as of 9:45 a.m. Eastern time, and the Nasdaq Composite was 0.6% lower.
Morgan Stanley fell 3% after it said a legal matter and a special assessment reduced its pretax profit by $535 million for the final three months of 2023, while PNC Financial Services Group fell 3% after reporting from Analysts had reported expected weaker results. Goldman Sachs swung between losses and gains after reporting quarterly results that beat Wall Street forecasts.
If Wall Street analysts' forecasts are to be believed, companies across the S&P 500 are likely to report meager, if any, fourth-quarter earnings growth compared to last year. Earnings have been under pressure for more than a year due to rising costs and high inflation.
But optimism is greater for 2024, with analysts forecasting strong earnings per share growth of 11.8% for S&P 500 companies, according to FactSet. This, along with high expectations for multiple interest rate cuts by the Federal Reserve this year, have helped the S&P 500 post 10 successful weeks out of the last 11 weeks.
Treasury yields have already fallen sharply in the bond market amid expectations of impending interest rate cuts, which traders believe could begin as early as March. It's a significant turnaround from previous years, when the Federal Reserve sharply raised interest rates in hopes of controlling high inflation.
Loose interest rates and yields reduce pressure on the economy and the financial system while increasing the price of investments. And according to Michael Wilson, a strategist at Morgan Stanley, interest rates have been the main driver of the stock market over the past six months.
He expects this dynamic to continue in the near term, with “the bond market continuing to rule.”
Traders currently expect interest rates to be cut far more by 2024 than the Fed itself has announced. That raises the potential for big market swings surrounding every Fed official speech or economic report.
Yields rose on Tuesday to add pressure to the stock market. The yield on the 10-year Treasury note rose to 4.01% from 3.95% late Friday. Higher yields can have a negative impact on corporate earnings and have a negative impact on investors, among other things, although the 10-year yield is still well below the 5% level it reached in October.
On Wall Street, Boeing posted one of the market's bigger losses amid ongoing worries Problems for its 737 Max 9 aircraft after the recent accident involving an Alaska Airlines plane. Boeing fell 4.7%.
It was on the winning side Carrols Restaurant Group, the largest Burger King franchisee in the USA, which increased by 12.6%. Restaurant Brands International said it will buy any Carrols shares it doesn't already own for $9.55 per share in cash.
Stock markets abroad were also largely in the red, including Japan, which enjoyed a winning streak that took it to its highest level since its bubble burst in 1990.
The Nikkei 225 slipped 0.8% after the Japanese yen strengthened against other currencies. A stronger yen can hurt profits for Japanese exporters, and it rose on expectations that the Bank of Japan could prepare to end its long-standing policy of keeping interest rates below zero.
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` business reporters Matt Ott and Elaine Kurtenbach contributed.
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