NEW YORK (AP) – Early stock gains disappeared on Wall Street on Wednesday, leading to lower indices during morning trading. A…
NEW YORK (AP) – Early stock gains disappeared on Wall Street on Wednesday, leading to lower indices during morning trading.
Stronger than expected, the production report sent Treasury yields sharply higher as traders perceived this to mean that the Federal Reserve would continue to take aggressive action to slow the economy and curb inflation.
Energy reserves have risen along with the price of oil. Salesforce.com was a success for technology companies after reporting a strong quarter and raising its forecast for the year.
The S&P 500 was down 0.5% and the Dow Jones Industrial Average was down 0.5%. The Nasdaq was down 0.1%.
Shares weakened after the report showed that U.S. output growth accelerated last month, contrary to economists’ expectations of a relatively small slowdown.
While this is a good sign for an economy where investors are concerned about the possibility of a recession, it is also likely to keep the Federal Reserve firmly on track towards a sharp rise in interest rates.
Yields on the two-year Treasury, which tended to meet expectations from Fed moves, jumped to nearly 2.66% in 30 minutes after the report was released from 2.56%.
The Fed has already lifted its key short-term interest rate from a record low and has given a signal that it may continue to raise it twice as much as usual at upcoming meetings. Such growth is designed to slow the economy to eliminate high inflation spanning the economy.
The risk of an overly aggressive campaign could force the economy into recession. Even if this is not the case, higher rates are putting downward pressure on stock prices and other investments.
The Fed also began a program Wednesday to cut some of the trillions of dollars in treasury and other bonds it had amassed as a result of the pandemic. Such a move should put upward pressure on long-term rates.
The yield of the 10-year treasury rose to 2.92% from 2.84% just before the report was published.
Salesforce.com., A maker of customer engagement software, grew 13% after results exceeded analysts ’forecasts and increased forecasts for the year. Other major technology companies, including Apple and Microsoft, were also higher.
Oil prices recovered after falling from nearly $ 120 a barrel on Tuesday, when prices rose after the European Union agreed to block most oil imports from Russia due to its invasion of Ukraine. ConocoPhillips went up 2%.
Prices eventually fell on Tuesday based on speculation that OPEC plus a cartel of oil-producing countries could ease production limits and offset losses in oil production from Russia. But hours before U.S. markets opened, U.S. benchmark oil rose from $ 1.25 to $ 115.92 a barrel.
Brent crude, an international benchmark, rose $ 1.52 to $ 117.12 a barrel.
The jump of more than 50% this year’s oil prices is a big part of the high inflation spanning the world. Tuesday’s report shows that inflation in the 19 countries using the euro reached 8.1% in May, the highest level since the record began in 1997.
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