Most of Wall Street slips as bonds yields keep rising

NEW YORK -- Stocks mostly slipped in mixed trading Monday.

Slumps for oil-and-gas stocks weighed on the market after crude prices gave back some of the sharp gains made since the summer. The majority of stocks fell alongside them, with more than three-quarters of those within the S&P 500 sinking, but gains for Apple and other influential Big Tech stocks helped support indexes.

The S&P 500 edged up by 0.34, or less than 0.1%, to 4,288.39, coming off its worst month of the year. The Dow Jones Industrial Average dropped 74.15 points, or 0.2%, to 33,433.35, and the Nasdaq composite rose 88.45, or 0.7%, to 13,307.77.

Stocks have broadly given back 40% of their strong gains for the year since the end of July. The main reason is Wall Street's growing acceptance that high interest rates are here to stay a while as the Federal Reserve tries to knock high inflation lower. That in turn has pushed Treasury yields to their highest levels in more than a decade.

The yield on the 10-year Treasury climbed again Monday, up to 4.67% from 4.58% late Friday, and is near its highest level since 2007. High yields send investors toward bonds that are paying much more than in the past, which pulls dollars away from stocks and undercuts their prices.

Stocks that pay high dividends with relatively steady businesses see particular pain because their investors are more likely to switch between stocks and bonds. That puts a harsh spotlight on utility companies. Shares of PG&E dropped 5.6%, and Dominion Energy sank 5.3% for some of the sharpest losses in the S&P 500.

High interest rates also make borrowing more expensive for all kinds of companies, which can pressure their profits. Since the Federal Reserve indicated last month it likely won't cut rates as much in 2024 as had earlier been expected, the value of the U.S. dollar has also climbed against other currencies. That can mean a painful hit for S&P 500 companies, which get a big chunk of their revenue from abroad.

"If higher-for-longer rates keep the dollar at recent levels, corporate profits will face a genuine headwind," according to Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management.

Besides hurting financial markets in the aim of lowering inflation, high interest rates slow the overall economy and can cause disruptions in far-flung, unexpected corners of the economy.

The overall U.S. economy has so far been holding up, defying predictions that it would have fallen into a recession by now.

Manufacturing has been one area that's felt the sting of higher rates, and reports on Monday suggested it's still contracting, though perhaps not by as much as expected. A report from the Institute for Supply Management said U.S. manufacturing shrank in September for an 11th straight month.

More encouraging for Wall Street was that the report also indicated prices were easing in September. That could mean less pressure on inflation, which has been feeling heat recently from fast-rising oil prices.

Crude oil prices pulled back on Monday after charging higher from $70 in the summer. A barrel of U.S. crude fell $1.97 to settle at $88.82. Brent crude, the international standard, also sank. Brent lost $1.49 to settle at $90.71 a barrel.

The drop for oil dragged stocks lower across the energy sector. Exxon Mobil fell 1.7%, and Chevron lost 1.2%.

Information for this article was contributed by Matt Ott and Elaine Kurtenbach of The Associated Press.