Wells Fargo Investment Institute bets on rate cuts, lifts 2024 S&P 500 target

Most of Wall Street slipped, giving back some of the big gains from the day before. The S&P 500 fell 0.1% Tuesday, coming off its best day in nearly two months. The Dow lost 0.4%, and the Nasdaq composite edged up 0.1%. Roughly three out of four stocks in the S&P 500 ended lower, but Nvidia rallied to another record. It’s one of Wall Street’s most influential stocks because of its massive size and helped to limit the S&P 500’s losses. Treasury yields held relatively steady, while oil prices recovered some of their sharp losses from the day before.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

NEW YORK (AP) – Most of Wall Street is slipping Tuesday and giving back some of the big gains from the day before.

The S&P 500 was down 0.2%, coming off its best day in nearly two months. The Dow Jones Industrial Average was down 185 points, or 0.5%, with an hour remaining in trading, and the Nasdaq composite was 0.1% higher.

Eversource Energy tumbled 7.5% for one of the worst losses in the S&P 500 after it said it could take a hit of up to $1.6 billion against its results for the end of 2023. It’s negotiating the sale of its stake in several offshore wind projects, and it may need to account for a lower value for them due to several challenges.

Unity Software fell 8.1% after it said it will cut about a quarter of its workforce, or 1,800 positions.

Elsewhere in the airline industry, JetBlue Airways lost 10.7% after its chief executive, Robin Hayes, said he will step down for health reasons. He will be replaced by JetBlue’s current president, Joanna Geraghty, who will become the first woman to lead a major U.S. airline. On the winning side of Wall Street, Illumina jumped 5.1% after the biotechnology company said it expects to report stronger revenue for the end of 2023 than analysts had expected. Urban Outfitters climbed 7.5% after it said total sales at its stores, including Anthropologie, during the final two months of the year strengthened by 10% from 2022 levels.

Nvidia, meanwhile, rallied 3.3% and was on track to set an all-time high for the second straight day. It’s been riding a wave of excitement that its chips will stay in huge demand thanks to the boom around artificial-intelligence technology. And as one of Wall Street’s largest stocks, its movements carry more weight on the S&P 500 and other indexes than almost any other company.

That helped to limit the S&P 500’s losses, even though roughly three out of four stocks in the index were falling.

Financial markets have had a slow start to the year after roaring into the end of 2023. The S&P 500 had leaped to nine straight winning weeks to close out the year, mostly on rising hope that the U.S. economy will remain resilient and the Federal Reserve will cut interest rates sharply through 2024.

Some mixed data recently has bolstered criticism saying Wall Street may have gotten too optimistic about the number of rate cuts coming.

The Federal Reserve has already raised its main interest rate to the highest level since 2001, hoping to grind down the economy and investment prices to get inflation under control. With inflation down considerably from its peak, the Fed has indicated it may cut rates three times through 2024. That would give investment prices a boost and relax the pressure on the economy and financial system.

But traders are still betting on a better than 50% probability for at least six cuts, or double the Fed’s projection, according to data from CME Group. Critics say such a high number is unlikely unless the economy falls into a recession.

Treasury yields have already slid on anticipation of rate cuts, and they were holding relatively steady on Tuesday. The yield on the 10-year Treasury was holding at 4.01%.

In the oil market, crude prices clawed back some of their sharp losses from the day before, when Saudi Arabia made moves hinting at weakening demand. A barrel of benchmark U.S. crude rose $1.47 to $72.24. Brent crude, the international standard, gained $1.47 to $77.59.

This week’s headline events for Wall Street are likely to come toward the end of it. On Thursday, the U.S. government will give its latest monthly update on inflation at the consumer level. Continued progress there could show whether Wall Street’s hopes for rate cuts are justified or fanciful.

On Friday, big companies in the S&P 500 will begin reporting their results for the final three months of 2023. The broad expectation is for companies in the index to report modest growth in earnings per share from a year earlier.

In stock markets abroad, Japan’s Nikkei 225 rose 1.2% to notch its highest close since 1990. Indexes elsewhere had more modest moves, with many edging lower.

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