Markets flat on interest rate worries
Wall Street ended an erratic session essentially flat Monday as investors grew anxious about upcoming first-quarter earnings and the possibility that interest rates won’t be declining anytime soon. A $2 drop in oil prices lent support to the major indexes.
With the market closed for Good Friday, traders had their first opportunity to react to Labor Department data that showed stronger-than-expected job growth in March. The numbers indicated the economy might be in better shape than previously thought, and helped offset concerns about a continued slowdown in the housing market.
Takeover activity also provided some lift to the markets, with reports Dow Chemical Co. has been targeted by Middle Eastern investors and U.S. buyout firms in a deal that could be worth $50 billion. It would be the biggest leveraged buyout on the books.
But upbeat news about the U.S. economy and corporate activity was interpreted by some on Wall Street as reasons for the Federal Reserve to hold off on cutting rates. And, with corporate earnings season to begin when Alcoa Inc. posts results Tuesday – and profit growth levels expected to fall from previous quarters – investors had reason to be cautious.
“All things point to the Fed, and now it looks like they are going to put rates on the back burner for a while after Friday’s numbers,” said Jay Suskind, head trader at Ryan Beck & Co. “And, now the markets are looking toward earnings reports where expectations have already been tempered.”
The Dow Jones industrials rose 8.94, or 0.07 percent, to 12,569.14.
Broader stock indicators were mixed. The Standard & Poor’s 500 index edged up 0.85, or 0.06 percent, to 1,444.61, and the Nasdaq composite index fell 2.16, or 0.09 percent, to 2,469.18.
The Russell 2000 index of smaller companies fell 1.71, or 0.21 percent, to 811.64.
Monday’s modest moves left intact last week’s advance; the major indexes rose each day last week and returned to positive territory for the year. Most major European markets were closed Friday and Monday for an extended Easter holiday.
The Labor Department report showed nonfarm payrolls rose by 180,000 in March, above forecasts of 135,000. The unemployment rate fell to 4.4 percent, a five-month low. Should the economy be stronger than some analysts estimated, it could dissuade the central bankers from lowering interest rates in the near term.
“The positive influence of the jobs report, along with more M&A activity this morning, has been overshadowed by expectations that a rate cut is farther off in the distance,” said Michael Sheldon, chief market strategist at Spencer Clarke.
The report caused the bond market to fall sharply during a shortened trading day on Friday. Bonds held steady from Friday’s sell-off, with the yield on the benchmark 10-year Treasury note at 4.75 percent.
The dollar rose against other major currencies, while gold prices slipped.
Oil prices continued their steep decline, with a barrel of light sweet crude settling down $2.77 to $61.51 per barrel on the New York Mercantile Exchange. Tensions in the Middle East pushed crude higher in recent weeks, and eased after Iran released 15 British soldiers and marines. There is also speculation among traders that an Energy Department report will show higher-than-expected U.S. inventories.
Declining issues barely outpaced advancers on the New York Stock Exchange, where consolidated volume came to 2.32 billion shares compared with 2.31 billion shares traded Thursday.