Stock market today: Wall Street collapses after erasing earlier gain as yields increase pressure

NEW YORK (AP) U.S. stocks are tumbling Monday as rising bond market yields driven by a strong U.S. economy increase pressure on Wall Street.

The S&P 500 was down 1.1% in afternoon trading, following its 1.6% gain last week's loss, which was its worst since October. The Dow Jones Industrial Average was down 233 points, or 0.6%, as of 2:15 p.m. Eastern Time, and the Nasdaq Composite Index was down 1.6%.

The S&P 500 had risen 0.9% earlier in the day, rising as oil prices fell on hopes that international efforts to ease growing tensions in the Middle East can help. But Treasury yields also rose following the latest U.S. report. the economy will explode expectations.

The economy and financial markets are in a delicate phase where such strength raises traders' hopes for corporate profit growth, but also hurts growth expectations. easier interest rates coming from the Federal Reserve. These are the two main levers that set stock prices, and they simultaneously pull Wall Street in different directions.

Traders want lower interest rates, which can provide a boost to the broader economy, and much of the recent record highs in U.S. stock markets are based on such expectations.

But strong reports like Monday's, which showed that U.S. shoppers increased their spending at retailers last month far more than economists expected, are leading traders to expect only one or two rate cuts this year. year, according to data from the CME group. This is below expectations for six or more cuts at the beginning of this year. Some retailers are preparing for a possible lack of discounts.

High interest rates and bond yields hurt the prices of all types of investments, especially those that appear expensive or those that compete for the same types of investors as bonds.

As a result, real estate investment trusts recorded the largest losses in the stock market on Monday. When bonds offer higher yields, they drive away investors who might otherwise be interested in the relatively large dividends that real estate stocks pay. High rates can also put general pressure on property prices.

Office owner Boston Properties fell 2.9%, one of the S&P 500's steepest losses.

More influential was the weakness in stocks of big tech companies. Apple fell 2.1%, Nvidia 1.8% and Microsoft 1.7%. They have already benefited from low interest rates and often feel pressure when yields rise. Because they are also the largest stocks on Wall Street, their movements carry extra weight on the S&P 500 and other indexes.

Nvidia, for example, fell from an initial gain of nearly 2.8% to a loss in the afternoon and was the third force weighing on the S&P 500.

Some financial companies helped contain losses, announcing encouraging profits for the start of the year. There is pressure on businesses as a whole to generate higher profits as interest rates appear far less likely to provide near-term support.

Goldman Sachs rose 2.7% following its report.

M&T Bank rose 4.6%, one of the biggest gains in the S&P 500, after reporting first-quarter profit that slightly beat analysts' expectations. He also said it slightly reduced the level of pain that would result if the stressed commercial real estate sector took a big hit.

Charles Schwab rose 2.1% after also beating analysts' forecasts for its profit last quarter.

On the oil market, benchmark American crude remained stable at $85.67 per barrel. Brent crude, the international standard, fell 0.5% to $89.99 a barrel as political leaders around the world urged Israel not to retaliate after Iran attacks on Saturday involving hundreds of drones, ballistic missiles and cruise missiles.

Financial markets were nervous heading into the weekend. The worry was that an Iranian attack could widen the war between Israel and Hamas and ultimately restrict the flow of crude oil. But Israel said 99% of the drones and missiles had been intercepted, as diplomats called for de-escalation and the U.S. administration made clear it did not support a broader war with Iran.

Rising oil prices this year have raised concerns about their impact on inflation, which remains stable. stubbornly raised. After having cooled down well last year, inflation has regularly are higher than forecast for every month through 2024.

If inflation persists due to dynamics in the economy, that's not necessarily bad for stocks, Bank of America strategists led by Ohsung Kwon wrote in a BofA Global Research report. But it is stagflation that refers to the painful combination of a stagnant economy and high inflation.

Wells Fargo Investment Institute strategists raised their forecasts for when the S&P 500 index will end this year, in part because the resilience of the U.S. economy has prompted them to revise their forecasts upwards. While they expect the market to be choppy after strong gains since October, they say growth in the U.S. economy should boost business sales.

The 10-year Treasury yield rose from 4.52% to 4.63% Friday evening. The two-year yield, which moves more closely with expectations for Federal Reserve action, rose to 4.93% from 4.89%.

In foreign stock markets, indices were mixed across Europe. They suffered more in Asia, where Hong Kong's Hang Seng and Tokyo's Nikkei 225 both fell 0.7%.

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AP writers Matt Ott and Zimo Zhong contributed.