Stocks edge higher on Wall Street at close of a brutal week

NEW YORK –

Friday’s brutal week was over and Wall Street traders saw stocks rise in afternoon trading.

The S&P 500 rose 0.7% as of 1:15 p.m. Eastern. The Dow Jones Industrial Average rose 0.4% to 30,053 points, and the Nasdaq rose 2.2%.

After suffering several large drops this week, every major index is now on a track to weekly losses. Investors are trying to adjust the bitter medicine of higher interest rate that the Federal Reserve (and other central banks) use in their fight against inflation. Higher rates can help fight inflation but they can also slow down economies and push prices lower for stocks or bonds.

“Any lack or lack of clarity in the Federal Reserve is going create a lot volatility in markets,” saidMegan Horneman is chief investment officer at Verdence Capital Advisors.

The benchmark S&P 500 is down more than 5% for the week. It fell more than 20% since its peak due to worries about inflation, rising interest rates, and a possible recession. It is currently 23% below its peak in early 2019, and back to the level of late 2020. This effectively erases 2021, one of Wall Street’s most successful years since the dawn of the millennium.

Investors have been concerned about whether the Federal Reserve and other central banks around world will increase interest rates to temper record high inflation, without causing recession.

Horneman stated that there is a lot of uncertainty about the timing of a recession right now, but that the risks are clearly increasing. said.

The Fed raised its key short-term rate by three-quarters a percentage point on Wednesday. This is triple the usual move. The Fed could consider another big increase at its July meeting. The central bank is also allowing some of its trillions of dollar bonds that it bought during the pandemic to be rolled off its balance sheets. This should increase pressure on longer-term rates. This is another way central banks have been taking away support they previously provided to markets in order to stimulate the economy.

The Fed is trying to slow the U.S. economic growth at the same time as other indicators of economic growth like retail sales slowing down. This has raised concerns about whether the Fed’s actions might end up being too aggressive.

Next week, investors will have another chance to get a sense of the Fed’s thinking by listening to Chair Jerome Powell testify before Congress. The testimony is scheduled to take place on Wednesday and Thursday.

Technology companies rose. Apple rose 2.1% Retailers, banks, and health care providers also saw increases. Energy companies suffered as crude oil prices in the United States dropped 6.4%. Exxon Mobil lost 4.8%.

Bond yields have fallen. The 10-year Treasury yield fell to 3.21%, from 3.30% on Thursday.

Monday, Juneteenth holiday: U.S. markets will close Monday.