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%.
The two-year yield, which moves more on expectations for Fed action on short-term rates, has zoomed even more. It’s at 2.74%, up from 2.68% late Thursday, and has more than tripled from 0.73% at the start of the year.
Markets around the world are feeling similar pressure on rates and inflation, particularly in Europe as the war in Ukraine pushes up oil, gas and food costs.
Germany’s DAX lost 1.9% Friday, while France’s CAC 40 fell 1.9%. The FTSE 100 in London slipped 0.9%.
Beyond developments in Ukraine, a presidential runoff election in France this weekend could also tilt markets.
In Asia, Japan’s Nikkei 225 fell 1.6%, and South Korea’s Kospi lost 0.9%. Stocks in Shanghai added 0.2% after authorities there promised to ease anti-virus controls on truck drivers that are hampering food supplies and trade.
Despite all the worries about inflation and interest rates, stronger-than-expected profits from most big U.S. companies are continuing to offer support for Wall Street.
Kimberly-Clark, the manufacturer whose brands include Huggies diapers and Kleenex, rose 8.8% for one of the biggest gains in the S&P 500 after it reported stronger profit and revenue for the latest quarter than analysts expected.
SVB Financial surged 13.5% after also reporting stronger arnings per share than expected.
But most stocks across Wall Street were falling Friday, with health care stocks among the biggest weights.
HCA Healthcare slumped 14.8% after reporting weaker earnings per share than analysts expected.
Retailer Gap fell 19.2% after it cut its forecast for sales and said the CEO of its Old Navy business will leave the company.