GLOBAL MARKETS-US stocks waver as rising Treasury Yields, Middle East tensions cap gains

BY Reuters | TREASURY | 04/16/24 11:22 AM EDT

(Updates to 10:55 a.m. EDT)

By Stephen Culp

NEW YORK, April 16 (Reuters) - Wall Street struggled for gains on Tuesday as rising U.S. Treasury yields and elevated geopolitical worries counteracted a generally positive string of first-quarter corporate results.

The three major U.S. equity indexes struggled for direction, although the blue-chip Dow was boosted by UnitedHealth Group (UNH) shares in the wake of its earnings report.

But stocks were held in check by benchmark Treasury yields climbing to fresh five-month highs due to lowered rate cut expectations from the U.S. Federal Reserve and heightened tensions arising from the growing conflict in the Middle East.

"You've seen yields move much higher and that's due to both the market and the Fed rolling back rate cut expectations," said Tim Ghriskey, senior portfolio strategist Ingalls & Snyder in New York. "The Fed is better off not cutting given how strong the economy is - a cut would put more fuel on the fire, there's no reason to create more growth when the economy is doing it for them."

With first-quarter earnings season underway, upbeat results from UnitedHealth (UNH), as well as Morgan Stanley (MS), offset Bank of America's (BAC) and Johnson & Johnson's (JNJ) respective profit drop and revenue miss.

Tensions in the Middle East were brought back to boil after Israel vowed to respond to Iran's weekend attack despite international calls for restraint.

"I expect the market to begin to buy again, but in the near term, geopolitical concerns are outweighing the strength of the U.S. economy," Ghriskey added. "You need strong earnings to keep this rally moving."

The Dow Jones Industrial Average rose 82.65 points, or 0.22%, to 37,817.76, the S&P 500 lost 9.73 points, or 0.19%, to 5,052.09 and the Nasdaq Composite dropped 18.86 points, or 0.12%, to 15,866.16.

European shares touched a near six-week low as mounting geopolitical uncertainties kept investors away from riskier assets.

The pan-European STOXX 600 index lost 1.57% and MSCI's gauge of stocks across the globe shed 0.78%.

Emerging market stocks lost 2.06%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 2.12% lower, while Japan's Nikkei lost 1.94%.

Yields for 10-year U.S. Treasuries hit a new five-month high on diminishing expectations Fed policy easing this year, and after stronger-than-expected economic data from China revived worries that inflation could reaccelerate.

Benchmark 10-year notes last fell 5/32 in price to yield 4.6468%, from 4.628% late on Monday.

The 30-year bond last fell 8/32 in price to yield 4.7553%, from 4.74% late on Monday.

The dollar briefly touched a five-month high against a basket of world currencies but was last essentially unchanged, as the yen continued to hover year 34 year lows, keeping intervention watchers on alert.

The dollar index rose 0.03%, with the euro up 0.08% to $1.063.

The Japanese yen weakened 0.17% versus the greenback at 154.55 per dollar, while Sterling was last trading at $1.2441, down 0.02% on the day.

Crude prices oscillated as supply concerns arising from geopolitical pressures were offset by strong demand implicated by robust Chinese data.

U.S. crude rose 0.23% to $85.61 per barrel and Brent was last at $90.20, up 0.11% on the day.

Gold prices where close to flat as rate cut concerns counter geopolitical risks.

Spot gold added 0.3% to $2,388.89 an ounce.

(Reporting by Stephen Culp; Additional reporting by Amanda Cooper in London Editing by Marguerita Choy)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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