GE Aerospace jumped 6% for the biggest gain in the S&P 500. It’s the second day of trading for the company after splitting off its power and energy business to mark the end of the General Electric conglomerate. Cal-Maine Foods rose 3.5% after reporting stronger profit for the latest quarter than expected by selling a record number of eggs.
They helped offset a 7.2% drop for Intel, which disclosed financial details about key parts of its business for the first time, including its money-losing foundry business.
Stocks have broadly slowed their roll since screaming 26% higher from November through March. Worries are rising that a remarkably resilient U.S. economy could prevent the Federal Reserve from delivering as many cuts to interest rates this year as earlier hoped. Critics have also been saying at least a pullback was overdue after stock prices had grown expensive by several measures.
The Fed has been indicating that it still may cut its main interest rate three times this year. Lowering its main rate from the highest level since 2001 would offer relief to the economy and financial system, while also boosting prices for investments. But Fed officials say they will start cutting only if more evidence arrives to show inflation is heading down toward their goal of 2%.
Several reports on the economy have come in stronger than expected recently. Such strength is encouraging because it means the economy continues to avoid a recession, and it should provide support for corporate profits. But it could also add upward pressure on inflation and discourage the Fed from cutting rates.
Markets took encouragement from a report on Wednesday morning showing construction, retail and other U.S. services businesses continued to grow last month, but not by as much as economists expected. The report from the Institute from Supply Management also said an index of prices paid was at its lowest level since March 2020, an encouraging trend for inflation.
That followed a report from earlier in the morning suggesting stronger gains than expected in hiring within the private sector. That report from the ADP Research Institute said employers accelerated their hiring last month, when economists were forecasting a slowdown.
A more comprehensive report on the job market for March will arrive from the U.S. government on Friday, and it will likely be the week’s headline economic data.
Traders have already drastically reduced their expectations for how many times the Federal Reserve will cut interest rates this year, halving them from a forecast of six at the start of the year. Some are preparing for two or even zero cuts this year because the Fed may not want to begin lowering rates too close to November’s election out of fear of appearing political.
In the bond market, yields rose. The 10-year yield climbed to 4.39% from 4.36% late Tuesday, though it trimmed its advance following the cooler-than-expected report on U.S. services businesses.
The two-year yield, which more closely tracks with expectations for Fed action, was holding steady at rose to 4.71% from 4.70%.
A climb in oil prices has also been adding pressure on inflation. A barrel of benchmark U.S. crude climbed again, up 0.9% to $85.88 to bring its gain for the year so far to nearly 20%. Brent crude, the international standard, rose by a similar amount and is up more than 16% so far in 2024.
In stock markets abroad, European indexes were mixed amid modest movements. A report showed inflation in Europe cooled by more than expected in March, but analysts say that might not be enough to move up the European Central Bank’s first cut to interest rates.
Asian markets fell more sharply earlier in the day, following up on Wall Street’s losses from Tuesday. Indexes fell 1.7% in Seoul, 1% in Tokyo and 1.2% in Hong Kong.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.