NEW YORK (AP) – Stocks are slipping again on Friday as the sharp, recent surge for interest rates keeps weighing on Wall Street.
The S&P 500 was 0.8% lower in early trading and on pace to close out a third straight losing week. The Dow Jones Industrial Average was down 389 points, or 1.1%, at 34,403, as of 10:15 a.m. Eastern time, and the Nasdaq composite was 0.3% lower.
A day earlier, Wall Street seemed set for healthy gains for the week after American Airlines, Tesla and other big companies reported strong profits or better forecasts for future earnings than analysts expected. But the S&P 500 swung from a gain to a loss as the chair of the Federal Reserve indicated it may indeed hike short-term interest rates by double the usual amount at upcoming meetings, starting in two weeks.
The Fed has already raised its key overnight rate once, the first such increase since 2018, as it aggressively removes the tremendous aid thrown at the economy and financial markets through the pandemic. It’s also preparing other moves to put upward pressure on longer-term rates. By making it more expensive for businesses and households to borrow, the higher rates are meant to slow the economy, which should hopefully halt the worst inflation in generations. But they can also trigger a recession, all while putting downward pressure on most kinds of investments.
The yield on the 10-year Treasury is at 2.89%, down from 2.91% late Thursday, but still close to its highest level since 2018. It began the year at 1.51%.