Stock market today: Unrelenting rise in Treasury yields drags Wall Street lower

By STAN CHOE
AP Business Writer

NEW YORK (AP) — Wall Street is sinking a bit more Tuesday under the weight of higher yields in the bond market.

The S&P 500 was 0.5% lower in early trading and back to where it was in June. The Dow Jones Industrial Average was down 157 points, or 0.5%, at 33,275, as of 9:37 a.m. Eastern time, and the Nasdaq composite was 0.5% lower.

After charging higher much of the year, U.S. stocks have lost roughly 40% of their value since the end of July. The main culprit is an unrelenting rise in Treasury yields, which have reached levels unseen in more than a decade.

The 10-year Treasury yield climbed again Tuesday, up to 4.71% from 4.69% late Monday and from just 0.50% early in the pandemic. It’s near its highest level since 2007.

When bonds are paying so much more in interest, they pull investment dollars away from stocks and other investments prone to bigger swings in price than bonds. High yields also make borrowing more expensive for companies and households across the economy, which can hurt corporate profits.

Yields have been on the march because investors are increasingly taking the Federal Reserve at its word that it will keep its main interest rate high for a long time in order to drive down inflation. The Fed has already yanked its federal funds rate to the highest level since 2001, and it indicated last month it may keep the rate higher in 2024 than it earlier expected.

Fed Gov. Michelle Bowman said in a speech Monday that she expects it to be likely appropriate “to raise rates further and hold them at a restrictive level for some time.” Restrictive is what Fed officials call high-enough rates to slow the overall economy.

Several other challenges are also tugging at Wall Street, besides higher yields. The resumption of student-loan repayments could drag on spending by U.S. households, which has been strong enough to help keep the economy out of a recession despite high interest rates. Higher oil prices are threatening to worsen inflation, and economies around the world look shaky.

A weaker recovery than expected in China’s economy was one of the main reasons McCormick, a maker of cooking spices, reported slightly weaker revenue for its latest quarter than analysts expected. Its profit matched expectations, but its stock fell 7.5%.

The world’s second-largest economy is also facing a crisis within its property development industry, and Hong Kong’s Hang Seng index tumbled 2.7% as investors unloaded stocks of developers.

However, China Evergrande jumped 28% after resuming trading Tuesday. Its shares were suspended last week as the troubled real estate developer announced that its chairman was under investigation.

Markets in mainland China and South Korea remained closed for holidays, while Japan’s Nikkei 225 index fell 1.6%. Stocks were also lower across much of Europe.

On Wall Street, Point Biopharma, which develops cancer-fighting treatments, soared 83.8% after Eli Lilly said it was buying the company for about $1.4 billion in cash. Eli Lilly slipped 0.9%.

Oil prices were ticking higher a day after slumping sharply to trim their big gains since the summer.

A barrel of benchmark U.S. crude rose 0.4% to $89.21 after charging mostly higher from $70 during the summer. Brent crude, the international standard, added 0.1% to $90.82 per barrel.

___

AP Business Writers Matt Ott and Elaine Kurtenbach contributed.