By DAMIAN J. TROIS and STAN CHOE – AP Business Writers
NEW YORK (AP) — Stocks ended mostly lower after another day of drift around Friday, leaving the market with its first losing week in the past four. Gains by energy companies were offset by declines in technology stocks. The benchmark S&P 500 fell 0.3%, the Dow Jones Industrial Average edged up 0.4% and the Nasdaq fell 1.3%. Treasury yields continued to rise as traders brace for the Federal Reserve to step more aggressively on the brakes in the economy to fight inflation. The 10-year Treasury yield hit 2.70%, its highest level in three years. Oil prices also rose.
THIS IS A BREAKING NEWS UPDATE. AP’s previous story follows below.
NEW YORK (AP) — Stocks are mixed on Friday and Wall Street heads for its first losing week in four years as investors brace for the Federal Reserve to clamp down on the economy more aggressively to combat inflation.
The S&P 500 was up 0.1% in afternoon trading after swinging between small losses and gains earlier. The Dow Jones Industrial Average rose 244 points, or 0.7%, to 34,828 as of 2 p.m. Eastern. Tech stocks again lagged the market, dragging the Nasdaq composite down 0.8%.
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The S&P 500 remains on track for a 1% loss this week. Stocks fell as the Federal Reserve swing more aggressively to fight inflation by raising short-term interest rates and other measures. It’s a sharp turnaround from keeping rates at record highs to stimulate the economy and get it through the pandemic.
Investors learned this week that the Fed could repeatedly raise short-term rates to double the usual amount in upcoming meetings, and it came close to doing so last month. The last time this happened was in 2000. The Fed also indicated in the minutes of its last meeting that it would likely reduce its massive stockpile of bonds by up to $95 billion a month. , starting next month.
Taken together, these measures should make borrowing more expensive for American households and businesses, which in turn would slow the economy and hopefully halt the highest inflation in 40 years.
On Wall Street, the rise in rates particularly hurt stocks considered to be the most expensive. This is because higher rates mean better returns for owning relatively safe bonds, making investors less willing to pay higher prices for riskier assets like stocks.
That’s why big tech and other high-growth stocks have dragged the market lower recently. Apple, Nvidia, Tesla and Amazon were among the heaviest market heavyweights on Friday, each falling at least 1.1%.
Concerns are also growing about the strength of the economy. With the Federal Reserve poised to raise rates so aggressively, there are fears that it is squeezing the brakes so hard that it will force the economy into recession. Although that’s not the consensus on Wall Street, economists at Deutsche Bank said earlier this week that they forecast a U.S. recession by the end of next year.
the war in ukraine made things more uncertain by threatening to worsen inflation and damage the global economy. The prices of oil, gas and food has been particularly volatile since Russia invaded the country.
A barrel of benchmark U.S. crude rose 1.2% to $97.19 on Friday. It has swung wildly in recent weeks and briefly topped $130 last month. Brent crude, the international standard, added 1% to $101.58 a barrel.
Much of the market’s attention has been on the bond market, where expectations of more aggressive action from the Fed propelled yields to their highest levels in three years. The 10-year yield climbed to 2.70% from 2.65% Thursday night. It was only 1.51% at the start of the year.
It could rise further as the Fed not only halts but cancels its program to buy billions of dollars of bonds.
Buying bonds has helped prices of stocks and other financial assets soar and markets stay relatively calm, wrote chief investment strategist Michael Hartnett in a recent BofA Global Research report.
Now the Fed is less than a month away from reversing that, which “by design will be negative” for financial assets, Hartnett said. He said this should lead to higher bond yields and higher volatility in the markets.
Meanwhile, COVID-19 continues to weigh on the economy around the world, especially in China. Shanghai residents face severe restrictions on travel and activities due to an upsurge in infections, with economic effects that reverberate around the world.
ACM Research, an equipment supplier to the semiconductor industry with offices and production facilities in Shanghai, said the restrictions would significantly affect its revenue. The stock fell 5.8%.
A rise in COVID-19 cases is also behind airline disruptions in Europe. Two major airlines, British Airways and easyJet, canceled around 100 flights on Wednesday. The industry is suffering from a staff shortage due to the virus.
AP Business Writer Yuri Kageyama contributed.
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