By STAN CHOE
NEW YORK (AP) – Wall Street is faltering between gains and losses on Tuesday in its first trading after falling in a bearish market amid concerns over a fragile economy and rising interest rates.
The S&P 500 was 0.1% higher in early trading after a pair of large corporations flexed their financial strength with stronger profits and payments to shareholders. However, it was an unstable gain, with the index hovering between a 0.1% loss and a 0.8% increase in the first half hour.
The Dow Jones Industrial Average rose 5 points, or less than 0.1%, to 30,522 at 10:20 a.m. Eastern time, and the Nasdaq compound was 0.1% higher after oscillating between a gain of 0. 9% and a loss of 0.3%.
Trade between markets was much quieter, though still tentative, following Monday’s world defeat. Treasury yields fell from their highest levels in more than a decade. Shares in Asia and Europe were also mixed, while a measure of nervousness among Wall Street stock investors was falling.
A notable exception was bitcoin, which fell another 6.5% to fall below $ 22,100, according to CoinDesk. Cryptocurrencies have been among the hardest hit in liquidating markets this year, with the Federal Reserve and other central banks raising interest rates to control inflation and forcibly disabling the “easy way” it has helped support markets for years.
Offering some market support was a report that showed that wholesale inflation was slightly lower in May than expected, although still very high.
Economists have said the data will not prevent the Federal Reserve from raising its interest rate this week by more than usual, and some have even speculated the biggest increase since 1994, which is three times the usual. But the figures offer a bit of a hurdle following last week’s market crash report that showed consumer-level inflation accelerated last month, rather than improving.
A relatively reliable warning sign of recession in the bond market was also waning. The two-year Treasury yield fell below the 10-year yield by 3.32% versus 3.35%. The two-year yield is usually lower than the 10-year yield, and in unusual circumstances where it is not, some investors see this as a sign that a recession may be coming in a year or two.
On Wall Street, Oracle shot up 9.5% after reporting higher earnings and earnings for its last quarter than analysts expected.
FedEx rose 14.2% after increasing its dividend payment by more than 50%.
It was the first U.S. stock exchange to trade after the S&P 500 closed 21.8% below its record earlier this year. That put it in a bear market, which is what investors call a 20% or higher drop.
At the heart of the settlement is the U.S. Federal Reserve’s effort to control inflation by raising interest rates. The Fed is struggling to control prices and its main method is to raise rates, but that is a powerful tool that can slow down the economy too much and cause a recession.
Other central banks around the world, including the Bank of England, have also been raising rates, while the European Central Bank has said it will do so next month and in September.
The war in Ukraine is driving up oil and food prices much further, fueling inflation and undermining consumer spending, especially in Europe. Meanwhile, COVID infections in China have caused some tough restrictions and a slowdown in companies that threaten to slow the world’s second largest economy and worsen supply chains.
“The old pre-crown balance, with low inflation, very fluid monetary policy and low geopolitical risk premiums is no longer sustained,” said Andreas Koester, head of portfolio investment at Union Investment in Frankfurt, Germany.
“We are now in a transition to a new post-crown balance, of which only the contours are visible, such as higher levels of inflation or the return to competition of the great powers on the international scene,” Koester added.
The shift from central banks, especially the Fed, to higher interest rates has reversed the dramatic rise in stock prices driven by massive market support after the pandemic hit in early 2020. Markets are preparing to rise higher than usual , in addition. of some discouraging signs about the economy and corporate profits, including a preliminary reading of historical lows about consumer sentiment haunted by high gasoline prices.
Higher benchmark rates increase the return on less speculative investments, such as bonds, by increasing their attractiveness relative to equities. And design moves will slow the economy by making the loan more expensive.
The risk is that central banks could cause a recession if rates rise too high or too fast. Last month, the Fed indicated additional double-digit rate hikes that are likely in the coming months. Consumer prices in the United States are at their highest level in four decades, up 8.6% in May from a year ago.
AP business writer Yuri Kageyama contributed.
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