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NEW YORK (AP) Shares tumble in Wall Street’s first trade on Tuesday after a five-week rally took it to its highest level since the spring of last year.
The S&P 500 was down 0.3% at the start of trading. The Dow Jones Industrial Average was down 184 points, or 0.5%, to 34,114, as of 9:50 a.m. Eastern Time, while the Nasdaq composite was up 0.1%.
The US stock market is taking a breather after rising in hopes that the economy can avoid a recession and inflation eases enough for the Federal Reserve to stop raising interest rates soon. A frenzy around artificial intelligence has also led a select group of tech stocks to massive gains.
That hope counters concerns that continued inflation will force the Fed to keep interest rates high longer, which could weaken the economy. With some of the simplest improvements in year-over-year inflation coming to an end soon, there may be a tougher road ahead.
Leaning on the lessons of the 1970s, the Fed is right to be cautious, even if that’s an inconvenient truth for stock investors, said Lisa Shalett, chief investment officer of Morgan Stanley Wealth Management.
Meanwhile, in China, the world’s second-largest economy is stumbling on its recovery following the easing of anti-COVID restrictions.
Shares in Hong Kong plunged 1.5% on Tuesday after China’s central bank cut interest rates less than some investors had hoped. Shares in Shanghai fell 0.5% on disappointment that Chinese authorities were not doing more to support one of the world’s key drivers of economic growth.
One of China’s largest companies, Alibaba Group, also fell after it shook up its top management and announced a new CEO. Stock trading in the US fell by 3.8%.
Tuesday was the first trade for Wall Street after a meeting between Chinese leader Xi Jinping and US Secretary of State Antony Blinken. It produced no signs of progress on Taiwan, human rights, technology and other contentious issues from either side.
Most stocks fell on Wall Street, but moves were generally modest.
Ball Corp., which makes aluminum cans and other products, lost 4.5% for one of the bigger losses in the S&P 500. It said Tuesday it is considering options for its aviation business, but there’s no certainty a formal decision will be made. will be taken. made. The stock was up 7.2% on Friday after a report that it wanted to sell the unit.
Dice Therapeutics rose 37.8% for a big gain after Eli Lilly said it would buy the biopharmaceutical company for $2.4 billion in cash. Lilly added 1%.
In the bond market, the yield on the 10-year Treasury fell to 3.72% from 3.77% late Friday. It helps set rates for mortgages and other important loans.
The two-year interest rate, which moves more than expected for the Fed, fell from 4.72% to 4.70%.
A Tuesday morning report found that U.S. homebuilders built more new homes last month than economists had expected. The number of building permits, an indication of future activity, also accelerated faster than expected.
There won’t be many potentially market-moving events for the next week after a Monday shutdown to mark the Juneteenth National Day.
Fed Chairman Jerome Powell will testify before Congress on Wednesday and Thursday. Last week, the Federal Reserve held its benchmark interest rate steady, the first time in 10 consecutive meetings it has not announced a hike. But it also warned it could raise rates two more times this year.
The Bank of England will meet on Thursday to discuss interest rate policy. Central banks around the world are moving in diverging directions as they battle inflation amid concerns about a stressed global economy.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
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