Wall Street wobbles on weaker profits

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Other big tech-oriented companies are scheduled to report their results after trading closes for the day, including Tesla and IBM.

The level of cash and profit that companies produce is one of the main levers that set stock prices on Wall Street. The other big one depends largely on interest rates, and there’s still a wide disconnect between what investors and the Federal Reserve see as coming later this year.

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Nearly everyone is expecting the Fed to raise its key overnight interest rate by 0.25 percentage points on Feb. 1. That would be another downshift in the size of the Fed’s rate hikes, down from 0.50 points last month and four straight increases of 0.75 points earlier. A slowdown in inflation since a summertime peak is raising hopes for the Fed to apply less additional pressure on the economy.

Many investors expect inflation to keep cooling, and they’re betting on the Fed to actually begin cutting interest rates toward the end of this year. The Federal Reserve, meanwhile, has been adamant that it won’t. It says it wants to keep rates high at least through the end of the year to ensure high inflation is truly stamped out.

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Higher rates hurt the economy by making it more expensive for businesses and households to borrow. They also hurt prices for stocks and other investments.

The yield on the 10-year Treasury, which helps set rates for mortgages and other economy-dictating loans, rose to 3.47 per cent from 3.46 per cent late Tuesday. The two-year yield, which moves more on expectations for the Fed, fell to 4.15 per cent from 4.21 per cent.

In stock markets overseas, India’s Sensex lost 1.2 per cent after a prominent short-selling firm, Hindenburg Research, accused the Adani Group conglomerate of stock manipulation and accounting fraud. Adani was founded by one of the world’s richest men, and the group’s chief financial officer called the report “a malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest courts.”

Elsewhere, European stocks were modestly lower. Japanese and South Korean stocks rose, while Chinese markets remained closed in observance of holidays.

AP

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