NEW YORK (AP) — Wall Street closed higher as the bond market loosened its vise on the stock market. The S&P 500 rose 0.8% Wednesday, coming off a 1.4% tumble that sent it to its lowest level in four months. The Dow rose 127 points, a day after wiping out its gains for the year. The Nasdaq composite added 1.4%. Treasury yields eased to give the stock market some more oxygen after reports suggested the U.S. economy may be cooling. Oil prices also tumbled by $5 per barrel to take some pressure off inflation and the threat of rates staying very high.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) — Wall Street is steadying itself Wednesday as the bond market loosens its vise on the stock market following signals of a cooling U.S. economy.
The S&P 500 was 0.4% higher in late trading, coming off a 1.4% tumble that had sent it to its lowest level in four months. The Dow Jones Industrial Average was up 5 points, or less than 0.1%, a day after wiping out its gains for the year so far. The Nasdaq composite was 1% higher, as of 3 p.m. Eastern time.
Stocks have struggled since the summer under the weight of soaring Treasury yields in the bond market. High yields undercut stock prices by pulling investment dollars away from stocks and into bonds. They also crimp corporate profits by making borrowing more expensive.
The yield on the 10-year Treasury, which is the centerpiece of the bond market, pulled back from its highest level since 2007, down to 4.74% from 4.80% late Tuesday. Shorter- and longer-term yields also eased to offer more oxygen to the stock market.
Yields fell following a couple mixed reports on the economy. The first indicated hiring by employers outside the government was weaker last month than expected.
On Wall Street, that's currently good news because the hope is a cooling job market would mean less upward pressure on inflation. That in turn could convince the Federal Reserve to take it easier on interest rates.
After already hiking its main interest rate to the highest level since 2001, the Fed has indicated it may keep its overnight rate higher next year than it had earlier expected. Treasury yields have correspondingly snapped higher as traders accept a new normal for markets of high rates for longer.
The Fed is paying particular attention to the job market because too much strength there could drive wages for workers much higher, which it fears could keep inflation well above its target of 2%.
Wednesday’s report from ADP suggested private employers added 89,000 jobs last month, a much sharper slowdown in hiring than the 140,000 that economists expected.
The report doesn’t have a perfect track record in predicting what the more comprehensive jobs report from the U.S. government says. That will arrive on Friday.
But “if Friday’s report also shows the labor market is cooling, stock investors may worry a little less about indefinitely higher interest rates,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office.
A second report on the economy said that growth for businesses in the U.S. services industry slowed in September by a touch more than economists expected.
It also offered some hints of sticky pressure on inflation, with prices paid by services companies rising last month at a similar rate as in August.
Oil prices tumbled Wednesday to take some heat off inflation. Benchmark U.S. crude fell $5.01 to settle at $84.22 per barrel, the worst drop in just over a year. It’s been pulling back since topping $93 last week. Brent crude, the international standard, lost $5.11 to $85.81.
Prices for crude have been generally charging higher from $70 during the summer following announcements of cuts to production by some oil-producing countries.
Wall Street is also absorbing the ouster of Kevin McCarthy as the speaker of the House of Representatives. The unprecedented move to remove a speaker from the position likely doesn’t change much in the short term, with funding for the U.S. government set until Nov. 17.
“That said, a leadership vacuum in the House raises the odds of a government shutdown when the current funding extension expires,” according to economists at Goldman Sachs.
A shutdown would drag on the U.S. economy, raising the risk of a recession, though financial markets have held up relatively well through past shutdowns.
On Wall Street, Big Tech stocks were helping to support the market after leading it lower a day earlier. They tend to move more sharply with expectations for rates because high-growth stocks are seen as some of the biggest victims of high yields.
Tesla jumped 4.8%, and Microsoft rose 1.4% to be two of the strongest forces pushing upward on the S&P 500 because of their massive size. Alphabet rose 1.8%.
On the losing end of Wall Street were big oil-and-gas companies, which fell with the price of crude. Exxon Mobil dropped 4.3%, Chevron lost 2.8% and ConocoPhillips slid 4.7%.
Cal-Maine tumbled 7.5% after the egg producer reported a sharp drop in profit for its latest quarter from a year earlier. The company said egg prices have returned “to more normalized levels” from their record highs as the industry recovers from the most recent outbreak of highly pathogenic avian influenza.
In markets abroad, stock indexes were mixed across much of Europe.
Asian stocks tumbled more, coming off the prior day's sharp losses from Wall Street. Tokyo’s Nikkei 225 index sank 2.3%, South Korea's Kospi dropped 2.4% and Hong Kong's Hang Seng slipped 0.8%.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
Stan Choe, The Associated Press
