Most stocks fall on belief that rates will stay 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 Standard & Poor’s 500 fell 10.41 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 average rose 63.86 points, or 0.2%, to 37,798.97, and the Nasdaq composite fell 19.77 points, or 0.1%, to 15,865.25.

A 5.2% climb for UnitedHealth helped support the market after the insurer reported stronger results for the first three months of the year than analysts expected. Morgan Stanley was another winner, rising 2.5%, after likewise topping expectations.

But the majority of stocks fell as Treasury yields rose after comments by Federal Reserve Chair Jerome H. Powell. They’ve been rising 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 said at an event Tuesday that the central bank has been waiting to cut its main interest rate, which is at its highest level since 2001, because it first needs more confidence that inflation is heading sustainably down to its 2% target.

“The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he said, referring to a string of reports this year that showed inflation remaining hotter than forecast.

He suggested that if higher inf lation does persist, the Fed will hold rates steady “for as long as needed.” But he also acknowledged that the Fed could cut rates if the job market unexpectedly weakens.

Treasury yields climbed immediately after Powell’s comments. They had already been higher after the Fed’s vice chair made similar comments earlier in the day.

Philip Jefferson said he expects inflation to keep easing and the Fed to hold its main rate “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 restraint at some point this year” if things went as he expected.

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

But yields later pared their gains as the afternoon progressed, and the twoyear yield drifted back to 4.98%. That’s still up from 4.91% late Monday.

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

The threat of rates staying high for longer hit realestate investment trusts and utility stocks particularly hard. They pay relatively high dividends and tend to attract the same kind of investors as bonds do. When bonds are paying higher yields, income-seeking investors may camp there instead.

Real estate stocks fell 1.5% for the largest loss among the 11 sectors that make up the S&P 500.

High rates can also translate into more expensive mortgages, and stocks of home builders slumped.

In markets abroad, stock indexes tumbled across Asia and Europe as they caught up with the hit Wall Street took Monday. Stock indexes fell 2.1% in Hong Kong, 2.3% in Seoul and 1.8% in London.