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Bonds Knock US Stocks Lower Thursday 08/20 15:28
The relief that swept the bond market just a day earlier disappeared as oil
prices, worries about high inflation and the U.S. government's debt kept
rising. That helped knock the U.S. stock market to its worst loss in three
weeks on Thursday.
NEW YORK (AP) -- The relief that swept the bond market just a day earlier
disappeared as oil prices, worries about high inflation and the U.S.
government's debt kept rising. That helped knock the U.S. stock market to its
worst loss in three weeks on Thursday, and Walmart led the way on concerns
about its upcoming profits. The S&P 500 fell 0.9% for its fourth loss in the
five days since setting its record last week. The Dow Jones Industrial Average
dropped 1.3%, and the Nasdaq composite sank 1%. Treasury yields climbed after
the price of Brent crude rose 2.4% following President Donald Trump's latest
threat to Iran.
THIS IS A BREAKING NEWS UPDATE. AP's earlier story follows below.
NEW YORK (AP) -- The relief that swept the bond market just a day before is
disappearing on Thursday as oil prices, worries about high inflation and the
U.S. government's debt keep rising. That helped knock the U.S. stock market
lower, and Walmart led the way on concerns about its upcoming profits.
The S&P 500 fell 0.7% and is on track for a fourth loss in the five days
since setting its all-time high last week. The Dow Jones Industrial Average was
down 661 points, or 1.2%, with an hour remaining in trading, and the Nasdaq
composite was 1% lower.
The bond market remains the center of the action after yields charged higher
through the summer. Treasury Secretary Scott Bessent made a surprise move
Wednesday that brought some temporary relief. His department said it will at
least double the size of its planned purchases of longer-term Treasurys from
Sept. 9 through Nov. 4.
That helped push yields down after the 10-year Treasury's yield had hit its
highest level in more than a year and the 30-year yield got back to where it
was in 2007, before the Great Recession sent yields toward zero worldwide. It's
a big deal because high yields slow the economy by raising interest payments
for people, companies and the government, and they can undercut prices for
stocks and other investments.
But analysts had cautioned the effect may be short lived, given how small
the purchases are relative to the overall size of the Treasury market and how
they don't fix the fundamental concerns of investors that had driven up yields.
Plus, more signals arrived quickly to keep those concerns high.
The U.S. government's debt topped $40 trillion on Wednesday, a staggering
record that arrived just months after the national debt first blew past the $39
trillion mark in April, because Washington continues to spend far more money
than it brings in.
And on Thursday, the price for a barrel of Brent crude climbed 2.4% to
$93.78 as uncertainty continues about when the war with Iran will allow oil
tankers to freely exit the Persian Gulf again. President Donald Trump
threatened Iran with "the MOST CRUSHING ECONOMIC OPERATION EVER TAKEN AGAINST
ANY COUNTRY" late Wednesday but provided few details.
That helped push the 10-year Treasury yield up to 4.69% from 4.65% late
Wednesday. It's almost back to its 4.71% level from late Tuesday, before the
Treasury Department made its announcement.
A couple encouraging reports on the U.S. economy also helped raise
longer-term Treasury yields, which move with expectations for the economy and
inflation in coming years. One said fewer U.S. workers applied for unemployment
benefits last week than economists expected, while another said manufacturing
in the mid-Atlantic region appears to be much stronger than expected.
On Wall Street, Walmart was the heaviest weight on the S&P 500 and fell 9.6%
even though it reported stronger profit and revenue for the latest quarter than
analysts expected. Investors focused instead on how an important underlying
measure of revenue growth at its stores slowed again. Its forecast for profit
in the current quarter also fell short of analysts' expectations.
Given its massive size, Walmart offers a look at how shoppers are doing
across the United States. A surprisingly weak update on sales at U.S. retailers
overall last month had raised worries that shoppers may be succumbing to
pressure from high inflation and a job market that may be looking less solid.
Advance Auto Parts tumbled 26.7% toward its worst loss in three years after
the retailer reported weaker revenue for the latest quarter, even though its
profit topped expectations. CEO Shane O'Kelly said that "tighter household
budgets constrained spending more than we anticipated, especially during the
last four weeks of the quarter."
Spending by U.S. consumers is the main engine of the economy, and a pullback
by them could exacerbate what's already a slowdown in growth for the economy.
A pullback could also mean a double-whammy for travel companies, which would
see fewer bookings when they have to pay higher prices for fuel. Norwegian
Cruise Line Holdings fell 5.3%, while United Airlines sank 4.1% and American
Airlines lost 2.7%.
Helping to keep Wall Street's losses in check was Deere, which reported
stronger profit and revenue for the latest quarter than analysts expected. It
rose 6.8% as the company said order trends indicate the agriculture equipment
business looks set to accelerate after this year.
In stock markets abroad, indexes were mixed in Europe following a stronger
finish in Asia.
South Korea's Kospi soared 5.9% for one of the world's biggest moves after
the two tech titans that dominate its market, Samsung Electronics and SK Hynix,
jumped. Such swings have become more common for Seoul's market, which has borne
the brunt of rising and falling worries that winning stocks in the
artificial-intelligence boom may have shot too high.
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