By Sruthi Shankar and Shristi Achar A
(Reuters) – The S&P 500 and Dow indexes slipped in the final trading session of Februray as Treasury yields rose to multi-month highs on bets of more interest rate hikes by the Federal Reserve.
Wall Street’s main indexes were set for monthly declines after a strong performance at the start of the year as signs of a strong U.S. economy and elevated inflation spurred worries that the Fed will stick to its hawkish policy for longer.
Five of the 11 major S&P 500 sectors were lower on Tuesday, with defensive utilities and consumer staples leading losses.
Traders have started to price in the possibility of a bigger 50 basis-point rate hike in March, although the odds remain low at about 23%, according to Fed fund futures, which also suggest rates peaking at 5.41% by September, up from 4.57% now.
BofA Global Research warned the Fed could even hike interest rates to nearly 6%.
The yield on two-year Treasury notes, which tracks investors’ expectations of the path of interest rates, rose to 4.82%, trading just below a near four-month high hit in the previous session.
“We’re talking about stickier inflation in the economy and higher interest rates for longer. Markets still seem to think that we’re going to get rate cuts sometime in the next 12 months and the evidence just does not support that,” said Michael Hewson, chief market analyst at CMC Markets.
Chicago Fed President Austan Goolsbee, a voter in the rate-setting committee this year, will speak later in the day.
At 9:42 a.m. ET, the Dow Jones Industrial Average was down 116.83 points, or 0.36%, at 32,772.26 and the S&P 500 was down 2.73 points, or 0.07%, at 3,979.51.
The tech-heavy Nasdaq Composite, however, rose 7.40 points, or 0.06%, to 11,474.38, supported by Meta Platforms and Applied Materials.
Target Corp rose 1.9% after the big-box retailer reported a surprise rise in holiday-quarter sales but cautioned on 2023 earnings due to an uncertain U.S. economy.
Zoom Video Communications Inc climbed 2.1% after it forecast annual profit above Wall Street estimates and said it will integrate more artificial intelligence into its products.
Chevron Corp slipped 0.1% even after the oil giant raised its annual share buyback outlook to between $10 billion and $20 billion.
Advancing issues outnumbered decliners by a 1.17-to-1 ratio on the NYSE and 1.32-to-1 ratio on the Nasdaq.
The S&P index recorded two new 52-week highs and seven new lows, while the Nasdaq recorded 33 new highs and 40 new lows.
(Reporting by Sruthi Shankar, Shristi Achar A and Johann M Cherian in Bengaluru; Editing by Saumyadeb Chakrabarty and Arun Koyyur)
