Wall Street Closes Lower Thursday
(AP) -- Stocks fell again Thursday, deepening Wall Street's losses for the week, as central banks around the world hiked interest rates to fight inflation.
The S&P 500 fell 0.8%, its third straight drop. The benchmark index is down about 3% so far this week.
The Dow Jones Industrial Average fell 0.4% and the Nasdaq composite lost 1.4%. The Russell 2000 index of smaller company stocks fell 2.3%, a sign investors are worried about the economy. The major indexes are on pace for their fifth weekly loss in six weeks.
Bond yields mostly rose. The yield on the 2-year Treasury, which tends to follow expectations for Federal Reserve action, rose significantly to 4.11% from 4.02% late Wednesday. It is trading at its highest level since 2007. The yield on the 10-year Treasury, which influences mortgage rates, jumped to 3.70% from 3.51% from late Wednesday.
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The latest wave of selling reflects concerns among investors that the Fed might have to get more aggressive than it has been signaling to ultimately get inflation under control, said Barry Bannister, chief equity strategist at Stifel. That scenario is unlikely if prices stabilize and fall, but it could take more than a year for that process to play out, he said.
"The question is, what's the patience level for both the Fed and the market," he said.
Central banks in Europe and Asia raised interest rates a day after the Federal Reserve made another big rate hike and indicated that more were on the way.
Britain's central bank raised its key interest rate by another half-percentage point. Switzerland's central bank raised its benchmark lending rate by its biggest margin to date, 0.75 percentage points, and said it couldn't rule out more hikes. Central banks in Norway and the Philippines also raised interest rates.
The Fed and other central banks are raising interest rates in to make borrowing more expensive. The goal is to slow economic growth enough to tame inflation, but not so much that economies slip into a recession. Wall Street is worried that the Fed may be pumping the brakes too hard on an already slowing economy, which makes steering into a recession more likely.
On Wednesday, Fed chair Jerome Powell stressed his resolve to lift rates high enough to drive inflation back toward the central bank's 2% goal. Powell said the Fed has just started to get to that level with this most recent increase. The U.S. central bank lifted its benchmark rate, which affects many consumer and business loans, to a range of 3% to 3.25%. That is the fifth rate hike this year and up from zero at the start of the year.
The Fed also released a forecast known as a "dot plot" that showed it expects its benchmark rate to be 4.4% by year's end, a full point higher than envisioned in June.
"There's not a lot of easy answers when you have the most powerful entity in the world, the Federal Reserve, committed to this path of hiking rates," said Michael Antonelli, market strategist at Baird. "It just has people scrambling."
The S&P 500 fell 31.94 points to 3,757.99 Thursday. The index is now at its lowest level since mid-June and down more than 21% so far this year.
The Dow lost 107.10 points to close at 30,076.68, while the Nasdaq finished down 153.39 points at 11,066.81. The Russell slid 39.85 points to 1,722.31.
The losses were broad and concentrated among retailers and technology, financial and industrial stocks. Starbucks fell 4.4%, Nvidia dropped 5.3%, American Express slid 3.8% and UPS fell 3.4%.
Health care stocks were among the few bright spots. Johnson & Johnson rose 1.8%.
Companies are closing in on the end of the third quarter and preparing for the next big round of earnings reports, though some early reports have trickled out. Homebuilder Lennar rose 2% after reporting strong financial results for its fiscal third-quarter. Fellow homebuilder KB Home fell 5.1% after a warning about supply chain problems and a mixed financial report.