NEW YORK (AP) -- Stocks were moderately lower in midday trading Wednesday after a stronger-than-expected report on manufacturing showed that it's likely the Federal Reserve will continue to aggressively raise interest rates to slow down the economy and tame inflation.
Energy stocks rose along with the price of crude oil. Salesforce.com led gains for technology companies after reporting a strong quarter and raising its outlook for the year.
The S&P 500 fell 1.1% as of 11:50 a.m. Eastern, while the Dow Jones Industrial Average lost 1%. The Nasdaq fell 0.9%.
Stocks weakened after a report showed that manufacturing growth in the U.S. accelerated last month, contrary to economists' expectations for a slight slowdown. The Institute for Supply Management's manufacturing index came in at a reading of 56.1, above forecasts.
While that's a good sign for an economy where investors are worried about the possibility of a recession, it also likely keeps the Federal Reserve firmly on its path to hiking interest rates sharply.
The yield on the two-year Treasury, which tends to follow expectations for Fed moves, jumped to 2.67% in the 30 minutes following the report's release, up sharply from 2.56%.
The Fed has already pulled its key short-term interest rate off its record low and has signaled it may continue raising it by double the usual amount at upcoming meetings. Such increases are meant to slow growth in order to stamp out the high inflation sweeping the economy.
The risk that is too-aggressive a campaign could force the economy into a recession. Even if it doesn't, higher rates put downward pressure on prices for stocks and other investments.
Wednesday also marks the start of the Fed's program to pare back some of the trillions of dollars of Treasuries and other bonds that it amassed through the pandemic. Such a move should put upward pressure on longer-term rates.
The 10-year Treasury yield rose to 2.92% from 2.84% just before the report's release.
Salesforce.com., a maker of customer relations software, soared 10% after turning in results that surpassed analysts forecasts and raising its outlook for the year.
Oil prices rebounded after declining from nearly $120 per barrel Tuesday, when prices surged after the European Union agreed to block the majority of oil imports from Russia because of its invasion of Ukraine. ConocoPhillips rose 2%.
Prices ultimately fell Tuesday on speculation that the OPEC+ cartel of oil producing nations might ease production limits and offset lost oil output from Russia. But just hours before U.S. markets opened, benchmark U.S. crude had climbed $1.25 to $115.92 per barrel.
Brent crude, the international benchmark, picked up $1.52 to $117.12 per barrel.
The jump of more than 50% for oil prices so far this year is a big part of the high inflation sweeping the world. A report Tuesday showed inflation in the 19 countries that use the euro currency hit 8.1% in May, the highest level since records began in 1997.