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Stocks slip on Wall Street as the price of oil falls back
Stocks are slipping in early trading on Wall Street Thursday, with energy stocks taking the hardest hits as the price of oil falls back, despite a round of encouraging reports on the economy.
The S&P 500 was 0.6% lower for the latest ebb in the back-and-forth trading it’s gone through the last few weeks. Expectations that the economy will soar thanks to COVID-19 vaccinations and huge amounts of spending by Washington are supporting much of the market, but a quick rise in interest rates is undercutting stocks at the same time.
The Dow Jones Industrial Average was down 245 points, or 0.8%, at 32,174, as of 9:52 a.m. Eastern time. The Nasdaq composite index was 0.7% lower.
Stocks of energy producers dropped to the sharpest losses after the price of U.S. oil slumped 3.3% to $59.14 per barrel. Diamondback Energy fell 4.9%, and Halliburton dropped 4.5%.
Oil’s price was giving back a big portion of its 6% jump from a day earlier, when it jumped above $61 per barrel after a skyscraper-sized cargo ship wedged itself across Egypt’s Suez Canal and raised worries about supply disruptions.
Yields in the Treasury market also continued to ease after the 10-year yield spiked above 1.70% last week, its highest level since before the pandemic started. The 10-year Treasury yield, which helps set rates for all kinds of loans, fell to 1.59% from 1.61% late Wednesday.
The decline came despite a report showing that the number of workers filing for unemployment benefits eased to its lowest level since before the pandemic erupted a year ago. Another report said the U.S. economy grew at a faster pace at the end of 2020 than earlier estimated.
Moves in Treasury yields have been a major reason for the swings in the stock market in recent weeks. When bonds pay more in interest, they make investors less willing to pay high prices for stocks. Businesses that are asking investors to wait many years for their big profits to begin rolling in are affected even more.
Technology stocks have borne the brunt of the pain of higher interest rates, and they’re also among the biggest companies in the market in terms of value. That gives their movements more heft than other stocks, and tech stocks were the biggest weight on the S&P 500 despite mostly modest moves for the biggest companies.
Microsoft slipped 0.2%. Tesla had a sharper fall, down 1.5%.
Treasury yields have been broadly rising with expectations for stronger economic growth and the inflation that may accompany it. The market got a particularly hard jolt a month ago, when an auction of seven-year Treasurys found relatively few bidders. Analysts called it a “horrifically bad” auction, and it helped send yields jumping. A bond’s yield rises when its price drops.
Another auction of seven-year Treasurys is scheduled for later in the day.
In European stock markets, Germany’s DAX lost 0.8%, and the French CAC 40 fell 0.6%. The FTSE 100 in London dropped 1%.
In Asia, Japan’s Nikkei 225 rose 1.1%, and South Korea’s Kospi added 0.4%. Hong Kong’s Hang Seng pulled back by 0.1%, and stocks in Shanghai slipped 0.1%
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