Yields on long-term US Treasuries fell for a fourth straight session, with 10-year yields hitting a two-week low of 1.557%. Falling yields eased market worries about an escalation of inflation. In March, the 10-year US Treasury bond yield at one point rose to 1.776 percent, the highest since early 2020.
Federal Reserve (Fed) officials continued to reassure about price pressure. Fed Vice Chairman Richard Clarida said that the Fed is fully capable of cooling down soaring inflation in case that happens, without derailing the economic recovery after the Covid pandemic.
Rising prices are what the market expected when the US economy recovered. But what worries investors is the rate at which prices rise.
At the moment, the bond market doesn’t appear to be worried about inflation, said Jim Paulsen, a strategist at The Leuthold Group. On the one hand, investors believe that the Fed may be right to say that inflation is temporary, but on the other hand are also worried when the Fed begins to signal that it will talk about reducing its asset purchase program.
“The bond market is pretty much in an equilibrium between the two,” Paulsen said.
At the close, the Dow Jones Industrial Average fell 0.24% to 34,312.46 points. The S&P 500 index fell 0.21% to 4,188.13 points. The Nasdaq index fell 0.03% to 13,657.17 points.
Analysts say the market could continue to struggle slightly until Thursday, when the personal consumption index (PCE) - a measure of inflation favored by the Fed - is released. Two weeks ago, US stocks sold off when the Labor Department announced that the consumer price index (CPI) increased much more than expected.
With a 2.04% drop, energy was the weakest of the 11 major S&P 500 sectors on Tuesday. Exxon Mobil shares fell 2.26% after sources familiar with the matter said that fund management company BlackRock wants to bring in some figures from the Engine No. 1 on the Board of Directors of the giant oil company.
Up 0.31%, real estate was a bright spot in this session, benefiting from the drop in bond yields.
The S&P 500 is now down about 1% from its all-time high on May 7.
Airline stocks were also among the gainers this session, benefiting from forecasts of a surge in travel activity in the US this summer. After providing upbeat forecasts for passenger numbers and ticket sales, shares of United Airlines and Hawaiian Holdings rose 1.5% and 3.6%, respectively.
Shares of aircraft maker Boeing rose 1.39% after signing a contract to sell 14 more 737 MAX planes to aircraft leasing company SMBC Aviation Capital.
On the NYSE, there were 1.53 times more losers than gainers. On the Nasdaq, the ratio is 1.77 times. The whole market had 9.48 billion shares successfully transferred, compared to an average of 10.41 billion shares per session in the last 20 trading days.
