(AP) -- Stocks closed lower on Wall Street Monday after an early rally evaporated by midafternoon, marking a choppy start to a week full of updates on the two things that set stock prices: how much profit companies are making and where interest rates are heading.
The S&P 500 fell 0.8% after having been up 1% in the early going, The index broke a five-day losing streak at the end of last week. Gains in energy producers, big retailers and other companies that rely on consumer spending were outweighed by a pullback in health care and technology stocks. Goldman Sachs rose after reporting better profit for the spring than expected.
The Dow Jones Industrial Average fell 0.7% and the Nasdaq composite lost 0.8%.
"It was a pretty big gain earlier today, and it's all gone," said Liz Young, head of investment strategy at SoFi.
Young expects the market to remain volatile through July, mainly because of earnings season. Johnson & Johnson, American Airlines and Tesla are among the dozens of S&P 500 companies that are scheduled to issue quarterly snapshots this week.
"This is the first earnings season in the cycle where we're probably going to get some pretty negative guidance and we're going to hear about where companies are being squeezed and they're going to be changing their outlook," she said.
The S&P 500 fell 32.31 points to 3,830.85. The Dow slid 215.65 points to 31,072.61, and the Nasdaq gave up 92.37 points to 11,360.05. The Russell 2000 index of smaller companies also fell. It dropped 5.96 points, or 0.3%, at 1,738.42.
The afternoon reversal is the latest bout of volatile trading for the market, which has been lurching mostly lower for weeks on worries that the Federal Reserve and other central banks around the world will slam the brake too hard on the economy in hopes of bringing down high inflation. If they're too aggressive with their interest-rate hikes, they could cause a recession.
"The Fed wants inflation data to come down and it's not going to retract its claws until that happens," Young said. "Pretty quickly the narrative is going to shift to, 'will the Fed go too far?'"
Still, some on Wall Street are seeing signs for at least temporary optimism. Oil prices have come off their highs, though U.S. crude rose 5.1% Monday. A key report released last week also indicated expectations are easing for inflation among households. That could prevent a more vicious cycle from taking root and ease the pressure on the Federal Reserve.
Expectations have come down for how aggressively the Federal Reserve will raise interest rates at its meeting next week. Traders are now betting on a roughly one-in-three chance for a monster hike of a full percentage point, with the majority favoring a 0.75 percentage point increase. As recently as Thursday, the heavy bet was on a hike of a full point.
Economists at Goldman Sachs are among those forecasting a 0.75-point increase, which would match last month's hike, instead of a more aggressive one. They cited in particular the softening of inflation expectations after Chair Jerome Powell said last month that the Fed pays close attention to them.
Across the Atlantic Ocean later this week, investors expect the European Central Bank on Thursday to raise interest rates for the first time in 11 years to combat inflation. Many investors expect an increase of 0.25 percentage points, "but more is not unthinkable," economists wrote in a BofA Global Research report.
Interest rates are one of the two main levers that set prices for stocks. The other is corporate profits, which are under threat given high inflation and slowdowns in parts of the economy. For the moment, at least, analysts are still forecasting continued growth.
Earnings season kicked off last week, and banks have dominated the early part of the schedule for reporting how much they earned from April through June.
Goldman Sachs was among the latest to report, and it rallied 2.5% after its profit and revenue were better than analysts expected. Synchrony Financial rose 0.3% after it likewise topped forecasts for profit and revenue.
Bank of America closed essentially flat after it fell short of analysts' profit expectations. Despite all the worries about a possible recession, Bank of America said its customers' spending and deposits remain strong.
In markets overseas, Hong Kong's Hang Seng index surged 2.7% after Chinese media reported that some stalled real estate projects had resumed construction after buyers threatened to stop their mortgage payments. Stocks in Shanghai added 1.6%.
Stocks also rose across much of the rest of Asia and Europe, with Germany's DAX returning 0.7%.
In the bond market, the yield on the 10-year Treasury rose to 2.98% from 2.96% late Friday. The two-year yield, which rose to 3.17%, is still above the 10-year yield. Some investors see that as an ominous sign that could presage a recession in a year or two.
Underscoring worries about a recession have been recent reports showing slowdowns in parts of the economy because of the Fed's rate hikes.
The housing market in particular has felt the effect of more expensive mortgage rates. A measure of sentiment among home builders released Monday weakened more than economists expected and sank to its lowest level in more than two years.