Stocks fall on Wall Street, giving back some recent gains

NEW YORK: Stocks are falling on Wall Street Wednesday, giving back some of their recent gains as uncertainty about interest rates and inflation continues to reign.

The S&P 500 was 0.8 per cent lower in midday trading following another mixed set of earnings reports from big companies. The Dow Jones Industrial Average was down 106 points, or 0.3 per cent, at 34,050, as of 11:15 am.

Eastern time, while the Nasdaq composite was 1.4 per cent lower. The pullback follows Tuesday's gain of 1.3 per cent for the S&P 500, which came after the first public comments by Federal Reserve Chair Jerome Powell since the central bank raised interest rates last week.

Markets found some solace in Powell's signaling that Friday's exceptionally strong jobs report wouldn't by itself push the Fed to get more aggressive on interest rates.

But analysts pointed out that Powell's comments were just as tough on inflation as before. He said that while he has seen improvements in inflation, the road ahead is still long to get it fully under control.

The Fed can help drive down inflation by raising interest rates and keeping them high, but that also raises the risk of a deep recession and hurts investment prices in the meantime.

The Fed has been saying that it plans to hike interest rates a couple more times and then hold them at a high level at least through the end of the year.

Friday's blockbuster report showing much stronger job growth than expected, which could raise the pressure on inflation, got Wall Street to move its forecast for rates closer to the Fed's.

But investors are still betting on the possibility of a cut to rates late this year. Uncertainty about where inflation and interest rates are heading has been at the center of Wall Street's big swings for the last year.

So have shifting expectations for the economy to fall into a deep recession, which would kneecap corporate profits. Companies have so far been reporting relatively lackluster earnings for the last three months of 2022, as rising costs eat into their margins.

Chipotle Mexican Grill fell 4.9 per cent after it reported weaker profit and revenue for the latest quarter than Wall Street expected. Jack Henry & Associates, a company in the financial technology industry, sank 9.3 per cent for one of the biggest drops in the S&P 500 after it reported weaker results than expected and trimmed financial forecasts for the full fiscal year.

Lumen Technologies tumbled 21.9 per cent despite reporting stronger results than expected. Its forecasts for some financial measures in 2023 fell short of analysts' expectations.

On the winning side was CVS Health, which gained 4.2 per cent after topping Wall Street's forecasts for revenue and profit. It also said it would buy Oak Street Health, a primary care company, in a deal it valued at about USD 10.6 billion In the bond market, Treasury yields were holding relatively steady after zooming higher in recent days on expectations for a firmer Fed.

The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, slipped to 3.67 per cent from 3.68 per cent late Tuesday.

The two-year yield, which moves more on expectations for the Fed, dipped to 4.45 per cent from 4.47 per cent.

In stock markets abroad, trading on Istanbul's exchange was suspended after the market benchmark sank more than 7 per cent as Turkey struggled with the aftermath of a magnitude 7.8 earthquake that has killed more than 9,500 people. It was unclear when trading would resume.