Stocks edge higher, remain turbulent amid recession worries

NEW YORK –

Wall Street’s morning trading saw stocks rise slightly Wednesday, reversing an early loss. Markets were volatile amid concerns over inflation and whether rising interest rate will help or hurt the economy.

The S&P 500 rose 0.4% as of 11:01 a.m. Eastern. The Dow Jones Industrial Average increased 65 points (0.2%) to 30,595 and Nasdaq gained 0.9%.

The choppy trading came after a solid rally Tuesday. It follows a turbulent period in the market that has seen sharp gains and occasional losses every hour. The benchmark S&P 500 is currently in a bear market, which means it has dropped more than 20% from its most recent high, which was in January. It has fallen in 10 out of 11 weeks but is still holding onto gains for this week.

Many of the losses have been attributed to rising inflation and to the Federal Reserve’s plan for aggressively raising interest rates to limit the impact of inflation on consumers and businesses.

Jerome Powell, Federal Reserve Chair highlighted the Fed’s determination not to raise interest rates too high to slow inflation. This has raised concerns that the central banking’s fight against rising prices could cause the economy to plunge into recession. This week Powell will address Congress. He will begin his speech with the Senate Banking Committee Wednesday.

Powell: “We’re not trying provoke and don’t think we will have to provoke a recessive recession.” said. “But we believe it is absolutely necessary that we restore the price stability, really for benefit of the labor markets as much as any other.”

Powell’s testimony comes one week after the Fed raised its benchmark rate by three quarters a percentage point. This is its largest hike in nearly three decades. Inflation is worsening. The Fed’s policymakers have also predicted a faster pace of rate increases this year and next than they had predicted 3 months ago. The Fed’s key rate will be 3.8% by 2023. This would be the highest rate in 15 years.

The Fed’s actions come as some troubling signals have emerged about economy, including sagging retail spending and a depressed consumer sentiment. Worries about inflation and interest rates have been made worse by a rise in energy and other key commodity costs following Russia’s invasion Ukraine.

Record high gas prices have been taking a greater bite out of consumers’ pockets and causing a slowdown in spending elsewhere. President Joe Biden has called on Congress to suspend federal gasoline- and diesel taxes for three more months. This is a move to ease financial pressures at pump.

Inflation in the United States is at its highest level in four decades. Businesses have been forced to increase the prices of everything, food included, to keep up with inflation. Despite the pandemic, consumer spending was strong throughout. However, it has been falling under tighter inflation pressure. Globally, inflation has reached new heights. Inflation in Britain topped 9.1% in May for the first time since 1979.

Massive gains from big tech and health care companies helped offset large losses from energy companies. Microsoft rose 1.2% while Eli Lilly rose2.3% U.S. crude oil prices fell 4.7%. Chevron fell 3.4%.

Bond yields fell sharply. The yield on the 10-year Treasury fell from 3.30% to 3.14% late Tuesday. The markets in Europe, Asia and North America also fell.

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Stan Choe, AP Business writer, contributed