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Novavax slumps after raising going concern doubts
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Kohl's slides after gloomy forecast
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Indexes down: Dow 0.17%, S&P 0.44%, Nasdaq 0.51%
(Updates to market open)
By Sruthi Shankar and Shristi Achar A
March 1 (Reuters) - Wall Street's main indexes fell on
Wednesday as Treasury yields surged after economic data and
comments from policymakers prompted investors to ramp-up
expectations of tighter U.S. monetary policy for a prolonged
period.
The yield on two-year Treasury notes , which closely tracks short-term interest rate expectations, rose to 4.9%, its highest level since 2007. The 10-year yield , the benchmark for global borrowing costs, topped 4%. "The 10-year Treasury is up and that is just as a natural headwind to equity valuations," said Matt Stucky, senior portfolio manager at Northwestern Mutual Wealth Management. "You also got a tick up in the ISM prices paid, which means that prices generally are rising now for manufacturing. It just means that the Federal Reserve is likely to push further into restrictive territory with their policy and stay there longer." The Institute for Supply Management's survey showed U.S. manufacturing contracted for a fourth straight month in February, while a measure of prices paid by manufacturers rebounded to 51.3 in February from 44.5 in January. Traders are pricing in expectations the Fed will raise rates in coming months to a 5.5%-5.75% range by September, from the current 4.50%-4.75% range.
That's higher than where Fed policymakers in December signaled they would need to raise the policy rate. U.S. monthly payrolls and consumer prices reports in the coming days will further help investors gauge the path of interest rates ahead of the Fed's March 21-22 meeting. Money market traders see an about 80% chance of a 25-basis-point rate hike later this month, but the odds of a bigger 50 bps rate hike have grown recently. Minneapolis Fed President Neel Kashkari, a voter in the rate-setting committee in 2023, said he is "open-minded" on either a 25 basis point or a 50 basis point rate hike in March. Meanwhile, Atlanta Fed President Raphael Bostic said monetary policy will have to remain tight "until well into 2024". The main U.S. benchmarks ended February with losses as investors braced for the possibility that the Fed will hike rates more than initially thought on signs of resilience in the economy. Energy and material sectors climbed over 1% each as commodity prices rallied after data showed China's manufacturing activity expanded at the fastest pace in more than a decade. At 10:23 a.m. ET, the Dow Jones Industrial Average was down 57.09 points, or 0.17%, at 32,599.61, the S&P 500 was down 17.47 points, or 0.44%, at 3,952.68, and the Nasdaq Composite was down 58.62 points, or 0.51%, at 11,396.93. Novavax Inc slumped 26.9% after the COVID-19 vaccine maker raised doubts about its ability to remain in business and announced plans to slash spending as it prepares for a fall vaccination campaign. Caterpillar Inc gained 2.4% after the construction equipment maker said it reached a tentative agreement with a labor union, averting a possible strike. Tesla Inc slipped 2.4% ahead of its investor day event. The electric automaker is readying a production revamp of its top-selling Model Y, Reuters reported, citing people familiar with the plan. Declining issues outnumbered advancers for a 1.21-to-1 ratio on the NYSE and 1.18-to-1 ratio on the Nasdaq. The S&P index recorded seven new 52-week highs and 11 new lows, while the Nasdaq recorded 50 new highs and 67 new lows. (Reporting by Sruthi Shankar and Shristi Achar A in Bengaluru; Editing by Arun Koyyur and Sriraj Kalluvila)
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