NEW YORK — Wall Street slipped Wednesday following another signal that it may have gotten too optimistic about when the Federal Reserve will deliver the cuts to interest rates that traders crave so much.
The S&P 500 fell 26.77 points, or 0.6%, to 4,739.21. It’s the second straight stumble for the index after it closed out its 10th winning week in the last 11 near its all-time high.
The Dow Jones Industrial Average dipped 94.45, or 0.3%, to 37,266.67, and the Nasdaq composite slumped 88.73, or 0.6%, to 14,855.62.
That in turn could push the Federal Reserve to wait longer than traders expect to begin cutting interest rates after jacking them drastically higher over the last two years. Lower rates would relax the pressure on the economy and financial system, while also goosing prices for investments.
Higher yields hurt all kinds of investments, and high-growth stocks tend to be some of the hardest hit. Drops of 2% for Tesla and 0.9% for Amazon were among the heaviest weights on the S&P 500. The smaller companies in the Russell 2000 index also slumped as much as 1.5% before paring their loss to 0.7%.
The Dow Jones Industrial Average, meanwhile, has less of an emphasis on tech and high-growth companies. That helped limit its losses relative to the rest of the market.
A top Fed official, Gov. Christopher Waller, said Tuesday that the central bank could take its time before its next move on rates given how resilient the economy has remained.
“These comments leave a rate cut as early as March on the table but also indicate that such a move is not a done deal,” according to economists at Deutsche Bank led by Amy Yang.
On Wednesday, across the Atlantic Ocean, the head of the European Central Bank warned in a speech about the risks of cutting rates too soon.
If Wall Street’s predictions for the timing of the rate cuts it desires so much do indeed prove wrong, it would be just the latest example of overzealousness by traders.
U.S. Bancorp fell 1.4% after reporting weaker profit than analysts had forecast. Big 5 Sporting Goods fell 8% after saying it expects to report a worse loss for the last three months of 2023 than earlier expected because of weak sales of winter-related products. The company said it was hurt by warmer temperatures and a lack of snowfall in the West from October through December.
Charles Schwab reported stronger profit for the latest quarter than analysts expected, but its stock still fell 1.3%. Its revenue fell short of estimates, and analysts said its better-than-expected earnings were likely due in part to easier tax rates.
Spirit Airlines was under heavy pressure again and sank 22.5%. Its stock nearly halved a day before after a U.S. judge blocked its purchase by JetBlue Airways out of fear that it would lead to higher airfares. JetBlue lost 8.7%.
Wednesday’s slip for Wall Street followed a rough day for financial markets worldwide. Stock indexes fell roughly 1% in Europe following the comments by Christine Lagarde, the head of the European Central Bank.
