US stock indices mixed as interest rates take a break
US stock indices mixed as interest rates take a break
US stock indexes finished almost where they started on Tuesday, as interest rates stopped accelerating after last week's sharp rise. But modest movements for the indices masked something that was churning below.
Commodity producers plummeted amid worries that inflation and lower demand are hurting their profits. At the other extreme were technology stocks and other sectors, which recovered some of the heavy losses caused by the rapid increase in interest rates last week.
In total, cross currents left the S & P 500 at 4.09 points, or 0.1 percent, at 2,880.34. It had cooled between small gains and losses for most of the day, and about three stocks fell in the index for every two that went up.
The Dow Jones industrial average fell 56.21, or 0.2 percent, to 26,430.57, and the Nasdaq compound added 2.07, or less than 0.1 percent, to 7,738.02.
At the center of the movements were interest rates, which influence the speed with which the economy grows, how expensive it is for businesses and households to borrow and the high price that investors are willing to pay for stocks. The 10-year Treasury yield fell to 3.20 percent from 3.22 on Friday night on the first trading day after the bond markets closed for a holiday on Monday.
The pause came after bond yields rose last week after several encouraging reports on the economy. The 10-year Treasury yield was only 3.05 percent last Tuesday, and the speed of the recent increase has been more worrying to investors than the level. If the rates are high enough, they can affect the profits of the companies and keep investors away from stocks and bonds.
The ease of Tuesday's rates helped the technology stocks, which have led the market, both in the rise during most of last year and in the fall during the past week. Technology companies are producing some of the biggest profits in the market, but their shares are also trading at relatively high prices relative to those profits.
Technology stocks in the S & P 500 have fallen 3 percent so far this month, compared to a 1.2 percent loss in the overall index. But the group rose 0.4 percent on Tuesday, as interest rates fell.
The energy stocks did even better, benefiting from another increase in the price of oil. Energy stocks in the S & P 500 rose 1 percent, led by an increase of 3.3 percent for Pioneer Natural Resources and a 2.7 percent rise for Apache.
"We like the energy at the moment, and we believe that prices are not likely to fall soon," said Barry James, president and portfolio manager at James Advantage Funds. "The explorers have been left a little behind by the refiners, and now is the time to catch up."
On the losing end were raw material producers, which fell 3.4 percent due to the sharpest loss among the 11 sectors that make up the S & P 500.
PPG, which sells paints and coatings, sank 10.1 percent to $ 98.56 on the biggest loss in the S & P 500 after it warned that higher oil and other material costs will hurt its third-quarter results. He also said demand is weakening in China, as well as in the United States and Europe for automotive finishing products.
Businesses in the economy are expected to report their earnings results for the summer in the coming weeks, and expectations along Wall Street are for another strong quarter of growth. Lower taxes and a strong economy in the United States are helping the profits, but investors also want to hear what companies say about their costs and how global trade war is affecting their businesses.
The International Monetary Fund lowered its forecast for world economic growth on Monday night, citing higher interest rates and ongoing trade battles. The IMF said the world economy will grow 3.7 percent this year, the same as in 2017, but below its previous forecast of 3.9 percent. The IMF also reduced its forecast for Chinese economic growth in 2019 to 6.2 percent, which would be the slowest since 1990.
In foreign markets, the Nikkei 225 in Japan fell 1.3 percent, the Hang Seng in Hong Kong fell 0.1 percent and the Shanghai Composite Index rose 0.2 percent. In Europe, the CAC 40 in France rose 0.3 percent, and the German DAX gained 0.3 percent. The FTSE 100 in London rose 0.1 percent.
In commodities markets, the benchmark crude in the US UU It rose 0.9 percent to $ 74.94 a barrel. Brent crude, the international standard, rose 1.3 percent to $ 85 per barrel.
Gold rose 0.2 percent to settle at $ 1,191.50 per ounce, silver gained 0.5 percent to $ 14.40 per ounce and copper rose 1.4 percent to $ 2.81 per pound.
The dollar rose to 113.05 Japanese yen from 112.98 yen on Monday night. The euro rose to $ 1,146 from $ 1,148, and the pound sterling rose to $ 1.3146 from $ 1.3090.
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AP writer Annabelle Liang contributed from Singapore.
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