US stocks are pulling back from their record on Wednesday.
The S&P 500 fell 0.2 per cent, a day after topping its prior all-time high set in August. The Dow Jones Industrial Average was down some 302 points, or 0.6 per cent, as of midday, and the Nasdaq composite was 0.4 per cent lower.
Stocks felt pressure as yields swung in the bond market. The yield on the 10-year Treasury climbed as high as 5.36 per cent in the morning, up from 5.27 per cent late Tuesday.
Higher yields put downward pressure on prices for stocks and other investments. They can also slow the economy by making it more expensive for everyone to borrow money. But the 10-year yield eased back to 5.29 per cent later in the day after the US Treasury sold US$39 billion of 10-year Treasuries at an auction, where the median yield was less than 5.26 per cent.
Yields also swung with oil prices, which continue to yo-yo amid uncertainty about when the war with Iran will allow the industry to return to normal. The International Energy Agency said Wednesday its members support accelerating the release of oil from inventories that they announced earlier this year, with a particular emphasis on diesel fuel.
The price for a barrel of Brent crude, the international standard, topped US$102 in the morning, but it later fell back to US$99.86, down 0.7 per cent, in the afternoon. That’s well above its US$72 price from before the war began, though it’s not as high as the nearly US$110 it was scraping last month.
Also pushing up on bond yields are worries about how much debt the US government and others worldwide have racked up, and how much more they add to it by the day.
The head of the International Monetary Fund (IMF) said Wednesday that record levels of debt for governments is one of the three major crosscurrents driving where the global economy goes, along with artificial-intelligence technology and high energy prices.
“Some very tough political choices stare us in the face,” IMF Managing Director Kristalina Georgieva said in a speech in Singapore ahead of autumn IMF-World Bank meetings to be held in Bangkok next week.
She pointed in particular to France and Italy, among other European countries with high debt.
France’s CAC 40 stock index dropped 1.2 per cent for one of the world’s biggest losses as yields on French bonds got back to jumping amid worries about the government’s debt and strained budget. Protests across France have raised pressure on the government to increase spending, which could add further to its debt.
On Wall Street, Worthington Steel fell 8.1 per cent after the metals processing and manufacturing company reported weaker results for the latest quarter than analysts expected.
The pressure is on companies to continue to deliver big growth in profits. Such strength would help to support stock prices when the other big lever that affects stock prices, interest rates, is pushing downward.
Analysts have high expectations for this upcoming earnings reporting season. They’re forecasting growth in earnings per share of nearly 30 per cent, according to FactSet. If companies fall short of that bar, stock prices could easily fall further from their record heights.
Constellation Brands added 2.1 per cent after the seller of Modelo beer and Robert Mondavi wine reported a stronger profit for the latest quarter than analysts expected. But its gain was restrained after it also gave a forecasted range for profit over its full fiscal year whose midpoint was below what analysts expected.
In stock markets abroad, indexes fell across much of Europe and Asia.
South Korea’s Kospi sank 2.0 per cent for one of the world’s largest losses following a sharp drop for SK Hynix, one of its two dominant stocks.
AP
