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Wall Street Opens Lower, Hurt by Rising Bond Yields; Dow Down 280 Pts

By Geoffrey Smith

Investing.com -- U.S. stock markets opened lower again on Wednesday, extending the losses that they posted on Tuesday in response to warning words from Lael Brainard and other high-ranking Federal Reserve officials.

By 9:40 AM ET (1340 GMT), the Dow Jones Industrial Average was down 282 points, or 0.8%, at 34,360 points. The S&P 500 was down 1.1% and the Nasdaq Composite was underperforming with a loss of 1.7%.

The moves came as benchmark 10-year interest rates rose to a new high for the year of 2.64%, having lurched higher on Tuesday when Brainard, nominated as the Fed's new vice-chair, said that the Fed could start selling bonds out of its portfolio as early as May at a faster pace than previously envisaged.

Brainard's comments were echoed later by Kansas City Fed President Esther George and San Francisco president Mary Daly. They led analysts from Deutsche Bank to conclude that there is now a high risk of the U.S. economy going into a recession in 2023 as the Fed is forced to raise interest rates above their neutral level in order to bring inflation down. Richmond Fed president Tom Barkin was meanwhile quoted by newswires as saying Wednesday that he thought interest rates were still around 2.5% below what the Fed considers neutral.

Barkin added that the economy "no longer needs" Fed intervention to support it. Last week's March labor market report had showed the unemployment rate dropping to its lowest since the start of the pandemic at 3.6%, Barkin said.

Long-term interest rates were in focus with the day's earlier economic data, as the Mortgage Bankers Association said its reference 30-year mortgage rate had risen another 10 basis points last week to 4.90%, its highest since early 2019. Recent data have shown increasing mortgage finally starting to have an impact on the housing market.

Early selling was broad-based, with money flowing out of megacaps such as Nvidia (NASDAQ:NVDA), Tesla (NASDAQ:TSLA) and the FAAMG group. Apple (NASDAQ:AAPL) stock, Amazon (NASDAQ:AMZN) stock, and Meta Platforms (NASDAQ:FB) stock, all lost over 2%, while Nvidia stock lost 4.0% and Tesla stock 3.6%, the latter's Shanghai plant still remaining closed due to an extended COVID-19 lockdown.

Also grabbing headlines in early trading was Stryker (NYSE:SYK) stock, after the medical device company attracted the attention of another short-seller. Stryker fell 3.6% after Spruce Point Capital accused it of creative accounting and highlighted that it has only $1.5 billion of unrestricted cash, but over $15 billion in debt.

Spirit Airlines (NYSE:SAVE) stock fell 4.2% after a sharp rise on Tuesday in response to JetBlue's all-cash offer, which at current levels represents a steep premium to Frontier Group's (NASDAQ:ULCC) offer for the discount airline. JetBlue (NASDAQ:JBLU) stock, meanwhile, fell another 9.3%

Elsewhere, Tilray (NASDAQ:TLRY) stock rose 7.5% after the pot producer recorded a surprise profit for the latest quarter, and also announcing a deal with Amazon-owned supermarket chain Whole Foods.

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