US: Wall Street stumbles as bond yields rise; McDonald’s, Coca-Cola slip
WALL Street’s main indexes fell on Wednesday as worries of a less dovish Federal Reserve lifted Treasury yields, pressuring megacap stocks and amplifying losses in McDonald’s and Coca-Cola shares.
McDonald’s slumped 4.7 per cent after an E. coli infection linked to its Quarter Pounder hamburgers killed one and sickened many.
Coca-Cola dipped 2.3 per cent after the company reiterated its annual profit growth forecast despite expecting higher revenue. The broader Consumer Discretionary sector dropped 1.1 per cent.
Benchmark 10-year US Treasury yields were at three-month highs, putting stocks under pressure. Markets are reassessing the size of interest-rate cuts over the next several months against the backdrop of strong economic data and the upcoming US presidential election.
Rate-sensitive megacaps took a hit, with Nvidia down 2.2 per cent and Apple off 2 per cent, pulling Information Technology stocks 1% lower and dragging on the tech-laden Nasdaq.
“The move higher in yields has actually been going on ever since the (Federal Reserve) meeting. It’s just in the past week or so that the market has woken up to it,” said Michael O’Rourke, chief market strategist at JonesTrading, adding that the 10-year yield is likely to stabilise around the 4.2 per cent level.
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“You also have to balance the fact that the US equity market is expensive on a valuation basis, so we could (be) due for profit-taking.”
Tesla, the first of the so-called Magnificent Seven companies scheduled to report results after market close, lost 1 per cent
The Dow Jones Industrial Average fell 300.90 points, or 0.70 per cent, to 42,623.99, the S&P 500 lost 38.38 points, or 0.66 per cent, to 5,812.82, and the Nasdaq Composite lost 201.84 points, or 1.09 per cent, to 18,371.29.
The benchmark index is set to log its third consecutive day of decline, if losses hold.
US markets are near record-high levels, but a combination of earnings, a changing monetary policy outlook and the upcoming presidential election will test the sustainability of the recent rally and could trigger some market volatility, analysts said.
The Fed’s Beige Book is on the radar later in the day. Richmond Federal Reserve President Thomas Barkin said the central bank’s fight to return inflation to its 2 per cent target may take longer than expected to achieve, limiting how far interest rates can be cut.
Boeing dropped 2.3 per cent after reporting a quarterly loss of US$6 billion owing to a crippling strike. Factory workers at the troubled planemaker will vote later in the day on a new contract proposal that could end the more than five-week-long standoff.
Meanwhile, Starbucks pared steep premarket losses to drop 0.5 per cent after suspending its annual forecast on Tuesday.
Semiconductor company Texas Instruments gained 3.5 per cent after its third-quarter profit beat forecasts, while AT&T rose 3.8 per cent after gaining more wireless subscribers than expected in the third quarter.
Declining issues outnumbered advancers by a 3.17-to-1 ratio on the NYSE, and by a 2.66-to-1 ratio on the Nasdaq.
The S&P 500 posted 17 new 52-week highs and two new lows, while the Nasdaq Composite recorded 43 new highs and 64 new lows. REUTERS
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