Stocks drift as steadying yields calm Wall Street after fall

NEW YORK (AP) — Stocks are making modest moves on Wall Street Tuesday, as steadying Treasury yields help calm the market following its worst tumble in months.

The S&P 500 was 0.1% lower in afternoon trading after drifting through small gains and losses. It’s coming off Monday’s 2.1% drop, which came on the heels of its first losing week in the last five.

The Dow Jones Industrial Average was down 134 points, or 0.4%, at 32,929, as of 1:45 p.m. Eastern time, and the Nasdaq composite was 0.2% higher.

Volatility has returned to Wall Street following what had been a strong summer as worries rise about how aggressively the Federal Reserve will raise interest rates to knock down high inflation. Recent comments from some Fed officials have cooled hopes the Fed may end up less forceful than feared.

The yield on the 10-year Treasury has climbed back above 3%, for example, after starting the month close to 2.60%.

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Yields calmed on Tuesday, though, which helped give stocks something of a reprieve. The two-year yield fell in particular following some weaker-than-forecast readings on the economy, down to 3.29% from 3.33% late Monday. The 10-year yield was holding steady at 3.03% after preliminary data suggested both the manufacturing and services sectors are weaker than economists expected.

“Gathering clouds spread across the private sector as services new orders returned to contractionary territory, mirroring the subdued demand conditions seen at their manufacturing counterparts,” S&P Global Market Intelligence senior economist Sian Jones said in a statement accompanying the report.

A separate report showed that sales of new homes slowed more than economists expected last month. The housing industry has been one of the hardest hit by this year’s turnaround in interest rates. As the Fed has jacked up its key overnight rate, mortgage rates have climbed too and put a chill on the industry.

Such weak data on the U.S. economy raises worries that a recession may indeed be on the way, but it also could encourage the Fed to take it easier on rate hikes. Worries about a slowing economy stretch around the world, and the value of one euro dropped below $1 amid concerns about Europe in particular.

The next big event circled on Wall Street’s calendar is a speech on Friday by Jerome Powell, the chair of the Federal Reserve. He’ll be speaking at an annual symposium held by the Fed in Jackson Hole, Wyoming, which has been the site of major market-moving speeches in the past.

In the stock market, losses for health care companies helped to offset gains for energy producers driven by stronger oil prices.

Several profit reports also drove trading as the earnings season draws to a close. More than 95% of companies in the S&P 500 have reported earnings, with overall growth of about 6%, according to FactSet.

Macy’s rose 3.7% after beating Wall Street’s second-quarter expectations, and J.M. Smucker gained 3.8% after delivering a sweet forecast despite inflation eating into its results. Zoom Video Communications slumped nearly 15% after cutting its financial forecast for the year.

Twitter fell 5.2% on reports that a former head of security filed whistleblower complaints with U.S. officials, alleging that the company misled regulators about its cybersecurity defenses and its problems with fake accounts. The allegations come amid the ongoing dispute with billionaire CEO Elon Musk, who is trying to withdraw his $44 billion takeover bid for the social media company.

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