Stocks slip as rates expected to remain high

NEW YORK » Most U. S. stocks slipped Tuesday, and Treasury yields rose on expectations that interest rates may stay high for a while.

The S& P 500 fell 1 0.41 points, or 0.2%, to 5,051.41. The index deepened its loss from the day before, when it sank under the pressure brought by a jump in Treasury yields. The Dow Jones Industrial A verage rose 63.86, or 0.2%, to 37,798.97, and the Nasdaq c omposite fell 1 9.77, or 0 .1%, t o 15,865.25.

A 5.2% climb for UnitedHealth helped support the market a fter t he i nsurer reported s tronger results for the first three months of t he y ear than a nalysts expected. Morgan Stanley was another winner, rising 2.5%, after likewise topping expectations.

But the majority of stocks fell as Treasury yields rose following comments by Federal Reserve Chair Jerome Powell. They’ve been climbing rapidly as traders give up hopes that the Fed will deliver many cuts to interest rates this year.

High rates hurt prices for all kinds of investments and raise the risk of a recession in the future.

Powell s aid at a n event Tuesday that the central bank has b een waiting to cut its main i nterest rate, which is at its highest level since 2001, because it first needs more confidence inflation is heading sustainably down to its 2% target.

“The r ecent data h ave clearly not given us greater confidence and instead indicate t hat it’s l ikely to take longer than expected to achieve that confidence,” he said, referring to a string of r eports t his year t hat showed i nflation r emaining hotter than forecast.

He s uggested i f higher inflation does persist, the Fed will hold rates steady “for as long as needed.” But he a lso acknowledged the Fed could cut rates if t he job market u nexpectedly weakens.

Treasury yields climbed immediately after Powell’s comments. They h ad a lready been higher after the Fed’s vice chair made similar comments earlier in the day.

Philip Jefferson said his expectation is for inflation to keep easing and for the Fed to hold its main r ate “steady at its current level.” That contrasted with his remarks in February, when he said “it will likely be appropriate to begin dialing back policy r estraint a t some point this y ear” if things went as he expected.

The yield on the two- year Treasury, which tracks expectations f or Fed a ction, shot as high as 5% immediately after Powell spoke and got back to where it was in November.

But yields l ater p ared their gains as the afternoon progressed, and the twoyear y ield d rifted back to 4.98%. That’s still up from 4.91% late Monday.

Traders are mostly betting o n the Fed delivering just one or two cuts to interest rates this year after coming into 2024 expecting six or more. They’re now also betting on a 12.5% probability that no cuts are coming, up from just 1.2% a month ago, according to data from CME Group.

The threat of rates staying high for longer hit realestate i nvestment trusts and utility stocks particularly hard. They p ay r elatively h igh dividends and tend t o attract the same kind of investors as bonds do.

When b onds are paying higher y ields, incomeseeking investors may camp there instead.