Wall Street Slips As Bond Yields Jump On Surprisingly Strong Manufacturing Data

NEW YORK (AP) -- Most U.S. stocks slipped Monday after a surprisingly strong report on U.S. manufacturing cast doubts on how much interest rates can ease this year.

The S&P 500 dipped 10.58 points, or 0.2%, from its all-time high to finish at 5,243.77. The Dow Jones Industrial Average dropped 240.52 points, or 0.6%, from its record to 39,566.85. The Nasdaq composite was an outlier and added 17.37, or 0.1%, to 16,396.83.

FedEx fell 3.3% after it said it did not extend its contract with the U.S. Postal Service to deliver air cargo domestically, which will end Sept. 29. Donald Trump's social media company, Trump Media & Technology Group, lost more than a fifth of its value in another frenetic day of trading. The company, whose main business is the Truth Social platform, said that it lost $58.2 million last year on just $4.1 million in revenue. Its stock tumbled 21.5%.

Universal Health Services sank 4% for one of the S&P 500's larger losses. It said a jury in Illinois awarded $535 million in damages to a patient who alleged negligence in a sexual-assault case involving another patient. The company said it has insurance to cover some of the amount, but the case's final resolution may end up having a material effect on its financials.

Helping to keep the losses in check was Newmont. The miner's stock rose 1.6% as the price of gold continues to set records.

In the bond market, Treasury yields spurted higher after a report said U.S. manufacturing unexpectedly returned to growth last month. It snapped a 16-month run of contraction, according to the Institute for Supply Management.

It's the latest evidence showing the U.S. economy remains strong despite high interest rates. That's a positive for the stock market because it can drive growth in profits for companies. But it can also keep upward pressure on inflation. That in turn could mean a more hesitant Federal Reserve when it comes to the cuts to interest rates that investors crave.

Following the manufacturing data, traders on Wall Street briefly trimmed bets on the first cut to rates coming as soon as June. That's still a "reasonable baseline" expectation, according to Deutsche Bank economists, but they say tough talk from Fed officials recently could hint at interest rates staying higher for longer than earlier thought.

The Fed has hiked its main rate to the highest level since 2001 in order to slow the economy and hurt investment prices enough to get inflation under control. Expectations for coming cuts have been a major reason the S&P 500 soared more than 20% from October through March.

This week will offer several economic reports that could sway the Fed's thinking, including updates on job openings across the country and the strength of U.S. services businesses. The headliner arrives on Friday, when economists expect a report to show that hiring cooled a bit last month.

A slowdown would be welcome on Wall Street, where the hope is that the economy remains solid but not so strong that it pushes inflation higher. Inflation is milder than it was at its peak nearly two years ago. But progress has become bumpier recently, with reports this year coming in hotter than expected.

Fed Chair Jerome Powell said again on Friday that the central bank is waiting to get "more good inflation readings" before cutting interest rates this year. It's been sticking with an outlook for three cuts to rates in 2024.

On Friday, a report said inflation is behaving as expected, at least by the measure that the Federal Reserve prefers to use. Both the U.S. bond and stock markets were closed that day.

Wall Street traders now largely see three cuts as the likeliest possibility this year, after earlier forecasting more, but some bets shaded toward the possibility of fewer cuts following the morning's better-than-expected data on manufacturing.

In the bond market, the yield on the 10-year Treasury jumped to 4.31% from 4.21% late Thursday. The two-year yield, which more closely tracks expectations for the Fed, climbed to 4.71% from 4.63%.

In stock markets abroad, Tokyo's Nikkei 225 fell 1.4% after a Bank of Japan quarterly survey on business conditions showed sentiment among large manufacturers declined for the first time in a year.

In China, stocks gained 1.2% in Shanghai after surveys suggested the country's manufacturing industry is strengthening.

In Europe, stock markets were closed for a holiday.


AP Business Writers Matt Ott and Elaine Kurtenbach contributed.