World News | Stocks fall, Wall Street set for another week of losses

NEW YORK, Feb. 17 (AP) – Wall Street fell again on Friday, with the S&P 500 on track for its first consecutive weekly loss since the start of the year.

Wall Street’s benchmark index fell 0.9% in afternoon trade, having slumped a day earlier to its biggest drop in four weeks on concerns that inflation is not slowing as quickly and smoothly as hoped. The Dow Jones Industrial Average was down 51 points, or 0.2%, at 33,646 as of 1:29 p.m. ET, while the Nasdaq Composite was down 1.4%.

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Stocks suffered turmoil in February after surging in January amid hopes that cooling inflation would allow the Federal Reserve to ease interest rates and the economy could avoid a deep recession. However, recent reports have shown that everything from the job market to retail sales to inflation itself has been stronger than expected.

That forced a sharp correction on Wall Street as investors moved their forecasts for interest rates closer to the “secular high” stance the Fed has long championed. High interest rates are hoped to keep inflation down, but they also hurt investment prices and could lead to a deep recession.

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Economists at Goldman Sachs have added another Fed rate hike in June to their forecasts, meaning they see its key short-term rate eventually rising to a range of 5.25% to 5.50%. A year ago the rate was virtually zero, and it hasn’t topped 5.25% since the dot-com bust in 2001. It is currently in the range of 4.50% to 4.75%.

The worry is that if inflation proves stickier than expected, it could prompt the Fed to take more aggressive steps than markets expect. The move has been most pronounced in the bond market, where bond yields have surged this month on expectations of a more hawkish Fed.

The two-year yield rose to 4.63%, from 4.62% late Thursday and less than 4.10% earlier this month. It was most recently near its highest point since November, when it reached its highest point since 2007.

The yield on the 10-year Treasury note, which helps set rates on mortgages and other important lending, was unchanged at 3.84% from 10% late Thursday.

Investors remained hopeful that the economy would avoid a worst-case recession, which still provided some support for the market. Jobs are still plentiful and shoppers are still spending to prop up the most important part of the economy — consumer spending.

But critics say many of those regions also tend to be among the last to feel the impact of higher rates and could still crack. The Fed has raised interest rates at the most aggressive pace in decades.

“Fed tightening is always going to spoil something,” investment strategist Michael Hartnett wrote in a note to Bank of America Global Research. He said the S&P 500 could fall to 3,800, down just over 7% from Thursday’s close.

Complicating matters are all the revisions and changes in methodology in recent economic data reports, which can obscure the signal they are sending, said Michael Green, chief strategist at Simplify Asset Management.

He also worries about how much of the high inflation engulfing the economy is the result of less competition due to the consolidation of companies across industries, something that rate hikes alone won’t fix.

“We’ve set up a feedback loop where the Fed will raise rates until they break something,” Green said. “The question then is: How do they respond?”

Big Tech and other high-growth companies bear the brunt of concerns about the Fed, as they are seen as the most vulnerable to rate hikes. Their stocks soared in those early years, in part because of record-low interest rates.

Microsoft fell 2.1 percent, Amazon fell 2.2 percent and Nvidia fell 4.2 percent, the most heavily weighted companies in the S&P 500.

Energy stocks also fell on lower oil prices. Exxon fell 3.9%.

The winning side was Deere, which rose 8.1 percent after reporting a profit in its latest quarter that topped analysts’ expectations.

In overseas markets, Hong Kong’s Hang Seng Index fell 1.3%. News of the apparent disappearance of Bao Fan, a major tech industry dealmaker, added to the losses.

China Renaissance, one of China’s largest investment banks, said in a filing to the Hong Kong stock exchange that it had lost contact with its founder, Bao. Bao’s disappearance follows a crackdown on tech companies over the past two years that Chinese officials say has ended.

Shares were also mostly lower in Asian and European markets. (Associated Press)

(This is an unedited and auto-generated story from a Syndicated News feed, the content body may not have been modified or edited by LatestLY staff)