Stock market today: Wall Street wilts to trim its May gains as Dow drops 400 points

NEW YORK (AP) — U.S. stocks sank under the weight of higher yields in the bond market on Wednesday.

The S&P 500 dipped 39.09 points, or 0.7%, to 5,266.95 and fell further from its record set last week. It trimmed its gain for May, which had been on track to be its best month since November, as four out of every five stocks in the index dropped.

The Dow Jones Industrial Average lost 411.32, or 1.1%, to 38,441.54, and the Nasdaq composite slipped 99.30, or 0.6%, to 16,920.58 after setting its latest all-time high.

American Airlines Group led a slump for airline stocks after cutting its forecast for profit and other financial targets for the spring. The carrier said fuel costs may be a bit lower than previously thought, but an important revenue trend would likely be as well. Shares fell 13.5%.

ConocoPhillips fell 3.1% after it said it would buy Marathon Oil in an all-stock deal valuing the company at $22.5 billion, including $5.4 billion of net debt. It’s the latest big deal for an industry that’s seen several buyout announcements recently. Marathon Oil rose 8.4%.

Advance Auto Parts sank 11% after its results and revenue for the latest quarter came up just shy of analysts’ expectations. The retailer said the industry has had a slower start to the year than expected.

Another climb in longer-term Treasury yields also weighed on the stock market, and the 10-year yield rose to 4.61% from 4.54% late Tuesday following an auction of $44 billion in seven-year Treasurys. Worries have been rising that meh demand from buyers for Treasurys in such auctions will help drive yields higher.

The 10-year yield is still down for the month, but it’s been creeping higher since dropping below 4.40% in the middle of May. Higher Treasury yields hurt prices for all kinds of investments.

This month’s swings in yields have also come as traders recalibrate their expectations for when the Federal Reserve could begin cutting its main interest rate, which is at its highest level in more than two decades.

Wall Street always yearns for cuts to rates because they can boost prices for investments and remove downward pressure on the economy. But traders have had to delay their too-optimistic forecasts for rate cuts several times this year because inflation has remained stubbornly high.

The Fed is trying to pull off the balancing act of grinding down on the economy just enough through high interest rates to get inflation fully under control, but not so much that it leads to widespread layoffs.

A report from the Fed released Wednesday said that it’s heard from businesses and other contacts around the country that consumers are pushing back against more increases to prices. That in turn is eating into companies’ profits as their own costs for insurance and other expenses continue to rise.

Despite worries about cracks showing in spending by U.S. consumers, particularly those making lower incomes, economists at BNP Paribas expect a healthy job market, slowing inflation and even gains made by some investors in cryptocurrencies to help support the main engine of the economy.

“The US consumer has defied the gravity of high interest rates and inflation,” as well as jitters about an uncertain economy, according to Yelena Shulyatyeva, senior U.S. economist at BNP Paribas.

U.S. stocks have been continuing to set records despite worries about interest rates staying high in part because stocks related to artificial-intelligence technology keep rising. Nvidia’s latest blowout profit report helped drive the frenzy even higher. After briefly dipping in morning trading, it rose 0.8% Thursday for its most modest gain since its profit report..

On the winning side of Wall Street was Dick’s Sporting Goods, which jumped 15.9% after topping analysts’ expectations for profit and revenue in the latest quarter. The retailer also raised its forecast for profit over the full year.

Chewy, an online seller of pet supplies, likewise reported stronger profit for the latest quarter than expected, and its stock jumped 27.1%. The company plans to return up to $500 million to its shareholders by buying back its own stock.

In stock markets abroad, indexes were mostly lower across Asia and Europe. Hong Kong’s Hang Seng fell 1.8%, South Korea’s Kospi dropped 1.7% and France’s CAC 40 fell 1.5%.

Stocks in Shanghai were roughly flat after the International Monetary Fund raised its forecast for China’s economic outlook, saying it expects the No. 2 economy to grow at a 5% annual pace this year. But it also warned that consumer-friendly reforms are needed to sustain strong, high-quality growth.

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AP Business Writers Yuri Kageyama and Matt Ott contributed.