NEW YORK (AP) — U.S. stocks are falling as worries about interest rates staying high continue to hem in the market. The S&P 500 was 0.8% lower early Tuesday. It set an all-time high last week. The Dow Jones Industrial Average fell 398 points. The Nasdaq composite was off 1.2%. One of the big reasons the stock market has been on a nearly unstoppable run since late October is the expectation that the Federal Reserve will cut interest rates several times this year. However several stronger-than-expected reports on the economy have caused worries that the Fed may not cut rates as quickly as hoped.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
Wall Street drifted lower in premarket trading Tuesday ahead of this week's trove of data from the labor market that could influence the Federal Reserve's decision on interest rates later this spring.
Futures for the S&P 500 slipped 0.3% before the bell while futures for the Dow Jones Industrial Average fell 0.4%.
Health care companies took a hit in early trading Tuesday after the government finalized its reimbursement rates for Medicare Advantage health plan providers. The rates, which were unchanged from the first proposal, cap annual out-of-pocket expenses for Medicare Part D participants at $2,000. There is some anxiety over rates and how they will impact margins.
Humana tumbled 10% and CVS slid 5%. Both of those companies warned investors earlier this year about rising costs.
PVH, the owner of Tommy Hilfiger and Calvin Klein, tumbled close to 21% after it gave a grim forecast for 2024, despite beating fourth-quarter sales and profit targets. That has become a pattern among specialty retailers in recent months, where strong quarterly performances are overshadowed by diminished expectations for 2024.
Donald Trump’s social media company, Trump Media & Technology Group, was down nearly 3% in early trading after losing more than a fifth of its value on Monday.
GE Aerospace launches today on the New York Stock Exchange after spinning off its GE Vernova division. Former industrial giant General Electric is now three separate public companies, including GE HealthCare. It is the end of an era for the conglomerate that most Americans are familiar with.
Treasury yields settled somewhat following big jumps on Monday after a report said U.S. manufacturing unexpectedly returned to growth last month, snapping a 16-month run of contraction.
It’s the latest evidence showing the U.S. economy remains strong despite high interest rates. That’s a positive for the stock market because it can drive growth in profits for companies. But it can also keep upward pressure on inflation. That in turn could mean a more hesitant Federal Reserve when it comes to the cuts to interest rates that investors crave.
Following the manufacturing data, traders on Wall Street briefly trimmed bets on the first cut to rates coming as soon as June. That’s still a “reasonable baseline” expectation, according to Deutsche Bank economists, but they say tough talk from Fed officials recently could hint at interest rates staying higher for longer than earlier thought.
The Fed has hiked its main rate to the highest level since 2001 in order to slow the economy and depress investment prices enough to get inflation under control. Expectations for coming cuts have been a major reason the S&P 500 soared more than 20% from October through March.
This week will offer several economic reports that could sway the Fed’s thinking, including updates on job openings, layoffs and the strength of U.S. services businesses. The headliner arrives on Friday, when economists expect a report to show that hiring cooled a bit last month.
A slowdown would be welcome on Wall Street, where the hope is that the economy remains solid but not so strong that it pushes inflation higher. Inflation is milder than it was at its peak nearly two years ago. But progress has become bumpier recently, with reports this year coming in hotter than expected.
Hong Kong stocks led gains in Asian markets Tuesday, though China real estate developer Vanke slumped more than 10%, while investors evaluated economic data from South Korea and Australia.
Tokyo’s Nikkei 225 index climbed 0.3% to 39,936.35, recovering from Monday's decline.
The Hang Seng in Hong Kong added 2.7% to 16,981.43, and the Shanghai Composite index was up 0.1% at 3,080.51.
In South Korea, the Kospi edged 0.1% higher to 2,750.63.
Australia’s S&P/ASX 200 gained less than 0.1% to 7,900.50.
In Europe at midday, France’s CAC 40 and Germany’s DAX each lost 0.1%, while Britain’s FTSE 100 gained close to 0.3%.
In other trading, U.S. benchmark crude oil rose $1.34 to $85.05 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, added $1.27 to $88.69 per barrel.
The U.S. dollar inched up to 151.64 Japanese yen from 151.63 yen. The euro cost $1.0747, up slightly from $1.0743.
On Monday, the S&P 500 dipped 0.2% from its all-time high to finish at 5,243.77. The Dow Jones Industrial Average dropped 0.6% from its record to 39,566.85. The Nasdaq composite was an outlier and added 0.1% to 16,396.83.
Zimo Zhong And Matt Ott, The Associated Press
