Dow, S&P retreat as yields edge up ahead of data

NEW YORK — The S&P 500 and the Dow lost ground and closed lower on Tuesday, pressured by a modest rise in Treasury yields as investors assessed the timing and size of any US Federal Reserve interest rate cuts in 2024 ahead of inflation data this week.

Expectations the central bank could begin cutting rates as soon as March have been slowly decreasing, with CME’s FedWatch Tool showing a 65.7% chance for a cut of at least 25 basis points (bps) for the month, down from 79% a week ago.

That has helped keep US Treasury yields hovering near the 4% mark, with the benchmark 10-year yield last up slightly at 4.019% after reaching a high of 4.053% earlier in the session.

Investors are bracing this week for more Treasury supply and the consumer price index and producer price index. Earnings season unofficially begins on Friday, with reports from banks such as JPMorgan.

The Dow Jones Industrial Average fell 157.85 points or 0.42% to 37,525.16. The S&P 500 lost 7.04 points or 0.15 % at 4,756.50, and the Nasdaq Composite gained 13.94 points or 0.09% at 14,857.71.

A late move higher helped push the Nasdaq back into positive territory for the day.

The majority of the 11 major S&P sectors fell, with energy the weakest with a decline of 1.63% while tech led the four sector gainers with a rise of only 0.25%.

Stocks had rallied on Monday, with the Nasdaq and the S&P 500 scoring their first daily percentage climbs of more than 1% since Dec. 21 and biggest one-day percentage advances since Nov. 14.

Atlanta Fed President Raphael Bostic on Monday stressed the need to keep monetary policy tight, while Fed Governor Michelle Bowman retreated from her persistently hawkish view and signaled a willingness to support eventual rate cuts as inflation eases.

Declining issues outnumbered advancers by a 2.1-to-1 ratio on the NYSE while on the Nasdaq, declining issues outnumbered advancers by a 1.7-to-1 ratio.

The S&P 500 posted 12 new 52-week highs and no new lows, while the Nasdaq recorded 90 new highs and 87 new lows. —