Wall Street looks to pare May gains as Dow falls 400 points

NEW YORK (AP) – U.S. stocks fell on Wednesday under the weight of higher yields in the bond market.

The S&P 500 index fell 39.09 points, or 0.7%, to 5,266.95, a further decline from the record set last week. He trimmed gains for May, which was expected to be the best month since November, as four of the index’s five stocks fell.

The Dow Jones Industrial Average lost 411.32, or 1.1%, to 38,441.54, and the Nasdaq fell 99.30, or 0.6%, to 16,920.58, setting its latest all-time high.

American Airlines Group sent airline shares tumbling after lowering earnings forecasts and other financial targets in the spring. The carrier said fuel costs may be slightly lower than previously thought, but there will likely be a significant revenue trend as well. Shares fell 13.5%.

ConocoPhillips fell 3.1% after it said it would buy Marathon Oil in an all-stock deal valuing the company at $22.5 billion, including $5.4 billion in net debt. This is the latest big deal for an industry that has seen several buyout announcements recently. Marathon Oil increased by 8.4%.

Advance Auto Parts fell 11% after last quarter’s results and revenues topped analyst expectations. The retailer said the industry started the year slower than expected.

Another rise in long-term Treasury yields also weighed on the stock market, with the 10-year Treasury yield rising to 4.61% from 4.54% late Tuesday after an auction of $44 billion in seven-year Treasury bonds. There are growing concerns that demand from buyers of government bonds at such auctions will help boost yields.

The 10-year bond yield remains low this month but has been slowly rising since dipping below 4.40% in mid-May. Higher yields on treasury bonds negatively affect the prices of all types of investments.

Yield swings this month also came as investors recalibrate their expectations about when the Federal Reserve might begin cutting its key interest rate, which is at its highest level in more than two decades.

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Wall Street always wants interest rate cuts because they can raise investment prices and remove downward pressure on the economy. However, investors have had to delay their overly optimistic forecasts of interest rate cuts several times this year as inflation remains persistently high.

The Fed tries to balance the effect of weakening the economy with high interest rates enough to fully control inflation, but not so much that it leads to widespread layoffs.

The Fed’s report released Wednesday said it heard from businesses and other contacts across the country that consumers oppose further price increases. This, in turn, eats into corporate profits as their own insurance costs and other expenses continue to rise.

Despite concerns about cracks in spending by U.S. consumers, especially those with lower incomes, economists at BNP Paribas expect a healthy labor market, slowing inflation and even gains by some cryptocurrency investors to help sustain the economy’s main engine.

“The American consumer has defied the severity of high interest rates and inflation” as well as concerns about an uncertain economy, according to Yelena Shulyatyeva, senior U.S. economist at BNP Paribas.

U.S. stocks continue to break record highs despite concerns about continued high interest rates, in part because of the continued rise in shares of AI-related companies. Nvidia’s latest report of massive profits has helped fuel the frenzy even further. After a brief decline in morning trading, it rose 0.8% on Thursday, the most modest gain since the earnings report.

Wall Street’s winner was Dick’s Sporting Goods, which rose 15.9% after beating analyst expectations for earnings and revenue in the latest quarter. The retailer also raised its profit forecast for the full year.

Chewy, the online pet supplies retailer, also reported a bigger-than-expected profit for its latest quarter, with its stock rising 27.1%. The company plans to return up to $500 million to its shareholders by buying back its own shares.

On foreign stock exchanges, indexes fell mainly in Asia and Europe. Hong Kong’s Hang Seng fell 1.8%, South Korea’s Kospi fell 1.7% and France’s CAC 40 fell 1.5%.

Stock markets in Shanghai remained roughly flat after the International Monetary Fund raised its forecast for China’s economic outlook, saying the No. 2 economy will grow at an annual rate of 5% this year. However, she also cautioned that consumer-friendly reforms were needed to maintain strong, high-quality growth.

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AP business writers Yuri Kageyama and Matt Ott contributed.

Stan Choe, Associated Press