Wall Street wavers, Treasury yields ease amid encouraging inflation report – WFTV

Yields in the Treasury market eased further from the highest levels in more than a decade. Yields fell after a report showed the measure of inflation that the Federal Reserve prefers to use was a smidgen cooler last month than economists expected.

The 10-year Treasury yield pulled back to 4.55% from 4.58% late Thursday. It charged this week to its highest level since 2007, up from 3.50% in May and just 0.50% in 2020.

When Treasurys, which are seen as some of the safest investments possible, are paying higher yields, investors are less likely to pay high prices for stocks and other riskier investments. That’s a big reason why the S&P 500 has dropped more than 4% in September to drag what had been a big gain for the year below 13%

Treasury yields have been climbing sharply as Wall Street comes to grips with a new normal where the Federal Reserve is likely to keep interest rates high for longer. The Fed is trying to push still-high inflation down to its target, and its main tool of high interest rates does that by trying to slow the economy and hurting prices for investments.

The Fed’s main interest rate is at its highest level since 2001, and the central bank indicated last week it may cut interest rates next year by less than it earlier expected.

Friday’s economic data showed not only that inflation was a touch cooler than expected in August, so was growth in spending by U.S. consumers. That can be a positive for inflation because it means not as many dollars are pouring into purchases. That in turn could give companies less encouragement to try to raise prices further. But it may also dent what’s been a big driver keeping the U.S. economy out of a recession.

“It came to a boil during a hot summer, and the temperature is really starting to come down,” said Brian Jacobsen, chief economist at Annex Wealth Management, of spending growth by U.S. consumers. “Higher energy prices, student loan debt repayments and real disposable incomes that have been on a declining trajectory since June doesn’t bode well.”

Oil prices have jumped to their highest level in more than a year, which is pressuring the economy by raising fuel costs for everyone. A barrel of U.S. crude fell 0.7% Friday to $91.08, but it’s still up sharply from $70 in June. Brent crude, the international standard, was down 0.7% at $92.47 per barrel.

The resumption of U.S. student-loan repayments, meanwhile, may funnel more dollars away from the spending by consumers that has helped to keep the economy afloat.

Another, more immediate threat for the economy could hit as soon as this weekend as the U.S. government nears another possible federal shutdown. Markets have broadly held up rather well during past shutdowns, but a few crucial economic reports are scheduled for the next couple of weeks.

The latest monthly update on the U.S. jobs market is due next week, with a couple of important reports on inflation coming the following week. Postponements of such reports could complicate things for the Fed, which has insisted it will make upcoming decisions on interest rates based on what incoming data say about the economy. The Fed’s next meeting on rates ends on Nov. 1.

On Wall Street, shares of Blue Apron soared 133% after the meal kit company said it was being bought by Wonder Group for $13 per share in cash in a deal valued at $103 million.

Big Tech stocks were helping to offset broader losses in the market, as they’re seen as some of the biggest beneficiaries from easier yields in the bond market. A 0.7% gain for Microsoft and 1% rise for Nvidia were two of the strongest forces pushing back against a broader decline in the S&P 500.

Energy stocks were among the biggest losers, with those in the S&P 500 falling 2% as a group. That was by far the worst performance among the 11 sectors that make up the index as oil prices slid, but they remain the market’s standout performers since the summer. Exxon Mobil fell 2.1%, and Schlumberger dropped 3.5%.

Shares of Ford and General Motors were slipping after the United Auto Workers said it will expand its limited strike to include another facility for each. Ford fell 1.2%, and GM was 0.7% lower.

In stock markets abroad, indexes were higher in Europe after exchanges were closed across much of Asia.

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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.