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Wall Street lower as economic reports cast doubt on interest rates

Wall Street lower as economic reports cast doubt on interest rates

Wall Street turned lower Friday after a pair of reports indicated the U.S. economy is growing at a faster-than-anticipated pace, raising the likelihood that the Federal Reserve will not cut interest rates anytime soon.
The slide extends a triple-digit decline in the Dow Jones industrials from the previous session, when stocks had their worst performance so far this year. The decline was triggered in part by a sell-off in the bond market, though in the current session long bonds recovered while short-term Treasuries remained under pressure.
The Commerce Department said new home sales rose 4.8 in December, well above economist projections and a sign that the slumping housing market might have bottomed out. The department said orders to U.S. factories for big-ticket manufactured goods rose in December by the largest amount in three months, led by demand for commercial aircraft.
Investors had been holding on to hopes that central bankers might cut rates in the first half of the year. However, a steady stream of positive economic data is making that unlikely and instead raising the possibility the Fed might have to resume its campaign of rate hikes that ended in August.
"The biggest driver is concern the Fed might see more reasons to raise rates than to lower," said Arthur Hogan, chief market analysts at Jefferies & Co. "You can't make the argument that earnings have been bad. If that were the driver, we'd be more in positive territory."
In midday trading, the Dow Jones industrial average fell 47.43, or 0.38 percent, to 12,455.13.
Broader stock indicators also slipped. The Standard & Poor's 500 index was down 3.51, or 0.25 percent, at 1,420.39, and the Nasdaq composite index fell 1.34, or 0.06 percent, to 2,432.90.
Long-term bonds edged higher, with the yield on the benchmark 10-year Treasury note down at 4.86 percent from 4.88 percent late Thursday. Shorter-term bond yields rose during the session. The market on Thursday was hit by a lackluster report on sales of existing homes, which sent long-term interest rates sharply higher and raised concern about the housing market.
The dollar was mixed against other major currencies, while gold prices fell.
Oil prices rose after a steep decline in the previous session because of doubts that OPEC members are making the production cuts promised last year. A price of a barrel of light sweet crude rose $1.02 to $55.25 on the New York Mercantile Exchange.
Stocks traded higher after the opening bell as investors were encouraged by strong quarterly results from heavy equipment maker Caterpillar Inc. More than 40 percent of the Standard & Poor's 500 index have already reported results.
Caterpillar, whose earnings are heavily tracked as an indication about the pace of U.S. construction, rose $1.16, or 2 percent, to $60.79 after it reported a 4.3 percent rise in fourth-quarter profit. The company also stuck by its full year forecast, which it believes will show continued strength in industries like mining, oil and gas.
Technology stocks rose after Microsoft reported second-quarter results beat Wall Street expectations, and projected double-digit growth in all of its core businesses through the rest of the fiscal year that ends June 30. Strong sales of its Xbox video game console helped offset the delayed release of its latest operating system, Vista.
Microsoft, which hit a 52-week high in the previous session, rose 54 cents to $30.99.
Amgen Inc. declined after the world's largest biotechnology company said fourth-quarter profit missed fourth-quarter projections. The stock fell $3.74, or 5.1 percent, to $71.11.
Advancers barely outnumbered decliners on the New York Stock Exchange, where volume came to 659.3 million shares.
The Russell 2000 index of smaller companies was down 1.73, or 0.22 percent, at 782.46.
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Updated : 2021-05-07 01:24 GMT+08:00